Sri Lanka rupee closes flat, bond yields dip on longer tenors

Friday January 23, 2026 7:16 pm

ECONOMYNEXT – Sri Lankans should never forget about the causes that led to the economic crisis and what it resulted to the nation if it needs to avoid another one in the future, prominent Indian economist Arvind Subramanian said.

Subramanian, a former Chief Economic Advisor to the Government of India, also said the reason behind economic success stories in Germany, the United States, and China has been based on the same concept, which he referred to as could be “completely idealistic” and “probably non implementable suggestion”.

“I am a strong believer that Sri Lankan society…. needs a mechanism, it can be social, it can be political, it can be institutional, for retaining the memory in your collective consciousness of the crisis and all the things that led up to it,” Subramanian told a gathering when he addressed an event organized by The Examiner in Colombo on Wednesday.

“That has to be forever in your consciousness if you’re not to repeat it.”

He further said Germany’s success in maintaining low inflation was due to the fact that the people in that country do not want to forget hyper inflation that led to the crisis.

“Germany is obsessed with low inflation because it suffered from very, very high inflation in the 1920s and German society, again, made that seared it into the collective consciousness of Germans, which is why they’re almost kind of anal about wanting to avoid low inflation,”

“And they did it through various mechanisms, you know, someent central banks, but there’s also a much bigger way in which they did it.”

He also referred to the experience of the U.S. Federal Reserve after the Great Depression in the late 1920s.

“The U.S Central Bank is fairly unique because the US Central Bank not only has low inflation in its mandate, but also a full employment,” he said.

This comes from the memories of the Great Depression and one third unemployment at its peak.

“That collective memory, they said, never again, and that’s how you got all kinds of institutional arrangements. In order not to repeat that, you’ve got to do something.”

He also explained the Chinese experience to prevent another crisis similar to the one before the 1970s.

“If you look at the Chinese communist Party, you want to understand the grand bargain that the Chinese Communist Party has struck with Chinese people,” he said.

“I would say it’s the following. You don’t get freedom… But in return, they said, we will deliver economic growth and economic prosperity, and we will promise not to get you or to avoid the chaos of what happened between the ‘ 50s and the ’70s.”

“What are the most chaotic periods in the history of most countries was what happened, and basically the …Chinese Communist Party said, we will avoid that, and therefore, you know, we have this new bargain.”

“So I think something similar, so when people say, how do you avoid instability, you say, oh, you know, you must have inflation targeting, you must do this, you must do that. None of that is a guarantee against future crises, unless there is consensus in Sri Lankan society that this should not be allowed to happen.” (Colombo/January 23/2026)