Sri Lanka’s Macroeconomic Challenges: A Tale of Two Deficits
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This paper provides a narrative of Sri Lanka’s history of twin fiscal and current account deficits. It examines the macroeconomic outcomes and policies to deal with the imbalances.
Fiscal dominance has been a persistent feature of Sri Lanka’s macroeconomic landscape. This has manifested itself in high macroeconomic volatility and the country has seen frequent balance-of-payments crises. The paper makes policy recommendations to deal with these issues.