Few countries navigated a more difficult course last year than the island nation of Sri Lanka. It defaulted on its foreign debt. Then food and fuel shortages sparked protests that toppled the government. Inflation peaked at 70%. Yet rather than being prologue to prolonged helplessness, Sri Lanka’s annus horribilis set the stage for a possible model of economic recovery.
The country of 21.6 million people has started to repair confidence with foreign creditors and restore price stability through financial discipline. The International Monetary Fund is expected to approve a $2.9 billion bailout on Monday, which would unlock foreign money for needed infrastructure. Last week, the United States lauded the government’s commitment to transparency.
What may be more important is an overhaul of Sri Lanka’s social contract. Last week, the government adopted a plan to uplift women and security. Parliament is working on a gender equality bill. In a country where women make up 35% of active workers but only 5% of the national legislature, these measures acknowledge the importance of gender inclusivity to economic health.
“The status of women in the Asian region is not satisfactory,” President Ranil Wickremesinghe said last week. When he announced the gender equality bill in December, he noted that female students account for 50% of higher education enrollment. That represents an undertapped economic resource. “We have a responsibility to increase women’s representation not only in parliament and politics, but in all other areas as well.”
Sri Lanka’s recovery comes at a time when global lenders are increasingly divided over how to contain a global debt crisis. At the end of January, according to the IMF, 28 countries were at high risk of default. A recent meeting of G-20 finance ministers found little agreement on how to solve that. China, the world’s largest lender, remains a key stumbling block. Other major creditors say Beijing’s lack of transparency obstructs coordinating debt leniency or recovery plans.
That underscores the importance of internal reform in debtor nations, where public patience is short. In Sri Lanka, 79% think corruption is rife, according to Transparency International. Freedom House ranks the country as only “partly free” in political freedoms and civil rights. Last week, the government postponed local elections because it could not pay for them.
Institutional reform, economists argue, is vital. But the protest that toppled Mr. Wickremesinghe’s predecessor last year signaled a different kind of renewal already underway.
“There’s really been an awakening of the citizen, from being complacent to dynamic activism with greater agency,” Bhavani Fonseka, a Sri Lankan human rights lawyer, told the International Institute for Democracy and Electoral Assistance. “This new activism we’re seeing among the citizenry also gives hope that people are being creative in how they hold politicians [and] public officials accountable.”
The IMF’s expected financial assistance will unlock investments in Sri Lanka’s future. But the country’s own investment in equality may ensure the biggest payback.