Statement delivered by H.E Shehan Semasinghe, State Minister of Finance, Sri Lanka
V20 MINISTERIAL DIALOGUE IX
16 October 2022
H.E. Shehan Semasinghe, State Minister of Finance, Sri Lanka
Excellencies, Ladies and Gentlemen, I will focus on two aspects of vulnerability. Mainly climate vulnerability and financial vulnerability.
Climate change today is a global reality that has brought forth unprecedented changes to the environment. Natural core systems and biodiversity have significantly disrupted socioeconomic processes across many economies.
Sri Lanka also has been ranked among the countries that are most vulnerable to climate change in the global climate change riskiness. The U.N. IPCC6 Business Report shows that the intensified water cycles due to climate change are bringing more intense rainfall and associated flooding. Changes in rainfall patterns, monsoon precipitation in many regions of the world.
These impacts are increasingly becoming visible in Sri Lanka. The frequent damages and losses of lives, livelihoods, and damages to the building environment, adding further pressure on already stretched fiscal balances. These enormous economic costs barely covers the significance and irreversible damage that would be done to ecosystems, social structures, and lives from extreme climate events.
In the meantime, Sri Lanka has been facing its worst economic downturn since independence in 1948 as a result of the COVID-19 pandemic and other global challenges. The weakened fiscal and external sector positions required Sri Lanka to announce a dead standstill and commence discussions with IMF and embark on structural adjustments to correct the direction of policies and stabilize the economy.
Sri Lanka is currently squeezed from multiple sides such as witnessing lasting effects of COVID, supply chain bottlenecks, capital outflows with interest, raging advanced economies, rocketing fuel and food prices, and rising cost of input such as fertilizer, that jeopardize food production levels.
In addition, climate change itself is also rising the cost of capital of the country. The signals of interdependence of climate risks and financial risks due to high risk of debt distress, fiscal situation constrains the ability of governments to meet immediate development needs and limits their ability to invest in longer term challenges such as climate change. Many countries like Sri Lanka cannot address climate risks and financial risks on their own.
While appreciating the recent initiatives such as IMF’s Food Shock Window and Resilience and Sustainability Trust, we have to acknowledge that these are not sufficient. This is why the gatherings as the ones we are having today are important to understand the risks and challenges of this crisis and to plan for the future towards sustainable economic development. Such groupings could also play a key role in encouraging multilateral and bilateral concessional financing and global technological transfers, which are essential to find innovative solutions to address these vulnerabilities. Thank you.