Sri Lanka’s Economic Crisis and the Role of Youth – The Island

Sri Lanka, once known for its vibrant culture and burgeoning economy, faced one of the worst economic crises in its history. Characterized by rising public debts, rampant inflation and sluggish growth, the crisis had a devastating impact on ordinary citizens, especially young people. As job losses increase and opportunities decline, young people are bearing the brunt of these economic challenges.

The roots of the crisis can be traced to a combination of factors, including mismanagement, corruption and political instability. Many citizens feel powerless due to these systemic problems; however, the youth are beginning to advocate for change. Historically, youth have played a crucial role in driving social and political reforms, and this trend continues as they strive to shape the country’s future. This is evident from the 2022 popular struggle, which culminated in the ouster of the then Rajapaksa government and ultimately the election of a Marxist president.

Understanding the experiences of young workers during this crisis is critical for policymakers and society as a whole. Their livelihoods and futures are at stake, and their perspectives provide valuable insights into the complexities of the crisis and the need for effective management strategies.

The five critical factors

Research identifies five critical factors that influence young people’s perception of the economic crisis: the quality of governance, monetary policy, political dynamics, trade regulations and institutional effectiveness. Analyzing these areas can help identify the key challenges young workers face and propose actionable solutions.

The unrest had exposed deep-seated problems within Sri Lanka’s governance and economic framework. Former President Ranil Wickramasinghe declared the country bankrupt in 2022, attributing it to years of poor financial decisions and political missteps. This has led to a dramatic decline in living standards, with poverty rates soaring and inflation eroding incomes. The situation is particularly dire for young people entering the labor market, as they face limited job prospects and stagnant wages.

Addressing these challenges requires a multifaceted approach. International organizations such as the IMF and the World Bank are working with the Sri Lankan government to increase transparency, improve debt management and strengthen financial supervision. However, integrating youth perspectives is critical in shaping effective responses to the crisis. Their firsthand experiences can illuminate the real-world consequences of economic policies and guide strategies aimed at revitalizing the economy.

Corruption remains a major obstacle to recovery. When government officials exploit their positions for personal gain, it undermines public trust and hinders growth. The lack of effective legal frameworks exacerbates this problem, making it essential for government to prioritize transparency and accountability. Strengthening the rule of law and implementing rigorous anti-corruption measures can help restore trust in institutions and create a more favorable environment for business and investment.

Moreover, effective government spending is crucial for economic stabilization. The way resources are allocated during crises can support recovery or worsen economic woes. Prudent fiscal policies that prioritize essential services – such as education, health and infrastructure – are crucial for promoting growth and protecting vulnerable populations, especially youth.

Natural disasters and climate change further complicate Sri Lanka’s economic challenges. Frequent extreme weather events threaten agricultural productivity and exacerbate poverty, disproportionately affecting young workers in rural areas. Addressing these vulnerabilities requires robust disaster preparedness and investments in climate resilience strategies.

The political landscape also has a significant impact on economic outcomes. Political instability often deters investment and hinders growth, creating an environment of uncertainty that is particularly challenging for young workers. Protests fueled by economic discontent can disrupt businesses and delay vital reforms, perpetuating problems. With Anura Kumara Dissanayake (AKD) elected president and the expected consolidation of parliamentary power, the disruptions previously caused by the JVP in ‘capitalist’ or business activities including private universities, resistance to the implementation of the 13th Amendment expected to decline under the Jathika Jana Balavegaya (JVP) administration.

Understanding the impact about young people in Sri Lanka

When a country struggles with issues such as corruption, weak law enforcement and a lack of transparency, it leads to a loss of public and investor confidence. This instability can create a vicious circle that exacerbates economic problems, especially for young people just starting their careers.

Young workers are often hit hardest during this economic downturn. High job insecurity, fewer job opportunities and an unstable economy can make it difficult for them to thrive. It is critical that policymakers and educators recognize these challenges and develop strategies that can help youth during such difficult times.

Economic decline, fueled by poor governance, is pushing many people into poverty and endangering their rights to essentials such as health care and education. A key problem here is that weak governance can lead to poor distribution of resources, making it even more difficult for young workers to find stable jobs. Corruption and political instability contribute to these problems, making it critical that the government prioritizes transparency and accountability.

Moreover, the monetary decisions of central banks have a significant impact on the economy. Policies such as tax cuts and interest rate changes can help or hurt the economy depending on how they are implemented. In Sri Lanka, recent economic mismanagement and poor policy choices have led to a significant increase in poverty, doubling the rate between 2021 and 2022. The lack of sound economic decisions has pushed many young workers into precarious situations, highlighting the need for better financial policies.

Political stability and effectiveness of institutions

Political stability also plays a crucial role in economic health. When governments are stable, they tend to attract more investment, create jobs and promote growth. Conversely, political unrest can deter investment and increase unemployment, worsening the economic situation. That’s why effective leadership and sound policies are essential to navigating financial storms.

Trade policy also has a significant impact on the economy and affects employment for young workers. For example, import restrictions can protect local industries, but they can also limit job growth in sectors that rely on global trade. In Sri Lanka, the ongoing economic crisis has led to the withdrawal of many international brands, resulting in job losses for young workers who often rely on these sectors for employment.

Finally, the effectiveness of institutions is of great importance during economic crises. Governments with strong systems can better respond to challenges and maintain public trust. However, when resources are limited and public dissatisfaction increases, this can hinder their ability to address pressing social and economic problems.

Sri Lanka’s economic crisis is closely linked to poor governance, which disproportionately affects the youth. Addressing corruption problems, promoting transparency and ensuring effective public policies are essential to creating a more stable and prosperous future. By understanding the experiences of young workers and engaging them in discussions about economic recovery, Sri Lanka can build a more resilient economy that supports future generations. As the country tries to recover, it must recognize the crucial role that youth play in shaping its future and invest in their potential to drive sustainable growth. Addressing the interconnected issues of governance and economic management is critical to rebuilding trust and promoting a better future for all Sri Lankans. The following four dimensions can be identified as crucial for economic growth from good governance.

Poor governance: This includes five main indicators; Transparency, anti-corruption, law and order, regulation, public expenditure:

Monetary decisions: This dimension includes factors such as beneficiary tax, VAT (value added tax), TFD (total external debt), boycotts, exploits and natural disasters.

Trade policy: This dimension looks at import ties and leadership.

Institutional effectiveness: This includes government institutions and involvement

The research shows that poor governance, monetary decisions, trade policy and institutional effectiveness all play a crucial role in how young working people view the economic crisis. The study rejected four null hypotheses, indicating that there are indeed significant factors influencing their perception of the crisis. Some findings contradicted previous studies, but they reflect the real experiences of working youth in Sri Lanka.