Sri Lanka, facing economic challenges and seeking to spur growth, plans to establish free trade agreements (FTAs) with several countries including India by the end of 2024. Foreign Minister Ali Sabry outlined the government’s strategy to address the nation’s economic woes.
Free Trade Agreements (FTAs) with Key Partners
- Sri Lanka aims to finalize an FTA with India by the end of 2024, alongside similar agreements with Indonesia, Malaysia, Vietnam, and China.
- These agreements are intended to open new markets for Sri Lankan businesses, contributing directly to economic growth.
Resumption of Talks with India
- Talks on the Economic and Technology Cooperation Agreement between Sri Lanka and India resumed in Colombo in October last year after a hiatus since 2018.
- Previous negotiations were hindered by political and trade union opposition.
Recent FTA with Thailand
- Sri Lanka recently signed an FTA with Thailand, providing access to a market worth USD 2.2 billion.
- This agreement represents a significant step forward for Sri Lanka’s economic prospects.
Export Challenges and Missed Opportunities
- Sri Lanka’s exports, which once contributed significantly to GDP, have declined to 15% of GDP from 30% in the 1990s.
- Limited market access has been a key obstacle, with Sri Lanka failing to capitalize on global markets unlike neighboring countries such as Vietnam and Bangladesh.
Economic Reforms and IMF Bailout
- Following Sri Lanka’s first-ever sovereign default in April 2022, President Gotabaya Rajapaksa was ousted, and President Ranil Wickremesinghe took office.
- Unpopular economic reforms were implemented to complement an IMF bailout, reflecting the government’s efforts to stabilize the economy.
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