The following article is based on the speech by the author as a Government of Asian Development Bank and President of Sri Lanka in their 55th Annual Meeting
It is my privilege to address you today, as the chair of the 55th Annual Meeting of the Asian Development Bank. Today, members of ADB have gathered in-person, after three years, here, in this dynamic city of Manila for the Second Stage of the ADB Annual Meeting. First of all, let me express my sincere appreciation to the Asian Development Bank (ADB) and the Government of Philippines for organizing this prestigious event. Amidst an unprecedented economic crisis that Sri Lanka is currently undergoing, we missed the opportunity to host the second stage of the Annual Meeting in Colombo. However, we are eagerly looking forward to welcoming you all in Colombo in the near future.
The ADB has made a very positive impact, which is being profoundly felt across the entire region. In 2021, the ADB committed $22.8 billion to members, and has mobilized an additional $12.9 billion in cofinancing through partnerships with other sources. The ADB’s Strategy 2030 seeks to respond to global challenges, including climate change and natural disasters, food and energy insecurity, whilst also embracing opportunities in the digital economy, sustainable energy, and leveraging technology for inclusive education and healthcare. Thus, the ADB has a crucial role in helping to shape and finance policies that improve people’s lives and livelihoods across Asia and the Pacific.
The supply chain shocks created by the COVID-19 pandemic is compounded with the prices of global commodities mainly food, fuel and fertilizer skyrocketing due to the Ukraine war. Higher food and energy prices are leading to stuttering the growth of middle class and has resulted in further insecurity amongst the vulnerable communities in the Indian Ocean region.
As a result of these shocks, there has been a spike in sovereign debt distress across emerging markets. The growth targets, both in East Asia and South Asia, have been revised downward. If this is not promptly addressed, it risks creating contagion of debt distress that threatens growth and financial stability across all economies. Countries with pre-existing economic vulnerabilities, including Sri Lanka, are the most affected. Therefore, creditors and debtor nations must work collectively in an equitable manner to ensure economic and financial stability across the region and indeed the world.
The developments on the global stage have further aggravated the self-inflicted economic crisis in Sri Lanka resulting in a political outburst that led to a change in Government. Today, we have stabilized the economy and many countries and stakeholders are keenly monitoring how we resolve this crisis. Many nations are keenly watching developments in Sri Lanka to see how we work with all stakeholders to resolve this crisis. We are well aware that the evolution of Sri Lanka’s economic crisis includes both domestic policy elements as well as external shocks. It follows that the resolution of the crisis also requires both domestic efforts and the support of external partners. It is incumbent upon Sri Lanka and our creditors and partners to set an example of how collaborative and good faith action can result in sustainable and equitable solutions to sovereign debt issues.
Towards this end, we have already undertaken major macroeconomic policy reform measures. I am pleased to inform you that we have now reached a Staff Level Agreement with the International Monetary Fund on a four-year program supported by the Extended Fund Facility. The programme is aligned with the commitment of the Government to implement an ambitious and comprehensive package of reforms that will help restore the sustainability of our public finances, addressing external imbalances, and restarting our growth engine through structural reforms and improvements in governance. Amidst major economic stress, Sri Lanka is undertaking an unprecedented fiscal effort as part of our commitment to restoring the country’s debt sustainability. It is our hope and expectation that Sri Lanka’s creditors, and all stakeholders, will support us in these efforts to restore our debt sustainability and help put the country back on the path of inclusive and sustainable economic growth.
Whilst Sri Lanka undertakes these deep and often painful reforms, we are experiencing rising unemployment and reduction in purchasing power of consumers. The Government is cognisant of the adverse impacts on the most vulnerable members of society. Accordingly, every effort has been taken to allocate greater financing and resources towards targeted support for social protection.
Asia has still to overcome the present global economic crisis. Unlike the financial crisis of 2008, in this instance, the economic levers alone are insufficient to stimulate global economic recovery. The factors underlining the main crisis is not only of economic origin but are also the consequences of evolving geopolitics. The result being the absence of cooperation amongst the G20 unlike the earlier crisis.
The Ukraine war on one side and the United States-People’s Republic of China rivalry, spurred on by military, trade and political differences, on the other side, are key contributors to this breakdown in cooperation. Added to this geopolitical rivalry are the droughts, floods and pandemic which are still present in Asia. All these challenges are compounded by the absence of global leadership – a time when the global economy is stuttering. As this global rivalry intensifies into a new cold war, which will determine a new global power balance by 2050, the inability of the major countries to give leadership to the mitigation of the global climate change crisis is becoming more apparent.