ISAS Insights

Sri Lanka may face a severe balance of payments crisis, primarily brought on by the inability to service foreign loans, a high fiscal deficit and a foreign exchange crisis, if the government fails to finance the deficit in time through foreign borrowings. In an effort to increase revenue and stabilise the economy, the government also plans to make structural changes to its fiscal policy. New taxes and revisions to those proposed in Budget 2016 were announced in March 2016 to widen the country's tax base. While post-war Sri Lanka carries much growth and investment potential, the country's near-term economic outlook remains precarious.