Real cost of schooling is what we fail to fix

By Dhananath Fernando

Originally appeared on the Morning

The GCE Advanced Level Examination results were released last week, and – as expected – social and mainstream media have been flooded with advertisements by tuition masters claiming credit for the top-performing students. While the spotlight remains firmly on the winners, a critical conversation is missing: the economics of education in Sri Lanka.

Sri Lanka’s A/Level education system has become fiercely competitive, but this competitiveness masks a deeper structural issue: our current education model is financially unsustainable.

Government school teachers are underpaid, and the State lacks the resources to attract and retain high-quality educators. As a result, many teachers rely on private tuition to supplement their incomes. Consequently, students prioritise tuition classes over regular school, often attending school merely to fulfil attendance requirements.

When results are announced, both schools and tuition providers share in the credit, but in truth, the system is fundamentally broken. While we congratulate the students who achieved excellent results, we must also acknowledge that many equally talented individuals may have been left behind due to systemic shortcomings.

This issue is not confined to A/Level education. Similar inefficiencies exist in both primary education and the university system. The extreme competitiveness of the A/Levels is driven largely by the limited number of seats available at State universities, especially in Science, Technology, Engineering, and Mathematics (STEM) fields where education is offered free of charge.

Yet the broader educational ecosystem is underperforming. At the school level, funds raised by school development associations and through Grade 1 admissions are often invested in infrastructure. However, these facilities are grossly underutilised. Schools remain closed for around three months annually and on all weekends. Even on regular school days, the maximum operating time is about eight hours. As a result, school infrastructure lies idle for more than half the time.

This is not to say that schools must operate 24/7, but there is enormous potential to repurpose existing resources. Facilities could be used for after-school childcare programmes or vocational training – services that not only meet real societal needs but also generate revenue for reinvestment in education. For example, improved after-school childcare could help increase female labour force participation, allowing more mothers to remain in the workforce.

The same logic applies to universities. While underfunded, Sri Lankan universities face immense demand – demand that forces many families to sell assets or incur debt to send children abroad, often to Australia. If public universities were allowed to accept fee-paying private students under a fair loan scheme, it would expand access without compromising free education. Moreover, opening up to foreign students could bring in much-needed revenue and foster academic and cultural exchange.

The presence of a university already creates a micro-economy – boarding houses, food vendors, photocopy services, and transport providers all thrive around campuses. Imagine the added economic benefits of attracting international students: increased demand for lodging, travel, tourism, and services, creating a ripple effect across sectors.

According to the Central Bank of Sri Lanka’s (CBSL) Annual Economic Review for 2024, Sri Lankan students spent approximately $ 194 million on education abroad. This figure highlights the untapped potential to build a robust local education market that not only retains students but also attracts others from the region, particularly from countries like India and the Maldives.

Ultimately, the economics of education must move beyond celebrating exam toppers. It must consider the majority who struggle in a system that offers limited choices. Expanding those choices will lead to greater economic activity and long-term growth.

Education is one of the most powerful tools for upskilling our labour force and accelerating national development. Yet, under our current model, we are allowing human capital to slip away, along with the economic opportunities it could bring, simply because we fail to make better use of what we already have.

Sri Lanka’s economic turnaround: The power of policy, not politics

By Dhananath Fernando

Originally appeared on the Morning

The Central Bank of Sri Lanka (CBSL) released its Annual Economic Review for 2024 a few weeks ago. At first glance, the dashboard of key macroeconomic indicators paints a remarkably positive picture – so positive, in fact, that some may wonder if the numbers have been massaged. But scepticism fades when you step into a grocery store or speak with a small business owner. The improvement in economic stability and the business environment is palpable.

What is particularly striking is that the new Government, while not having introduced bold new reforms, has also not derailed the stability programme set in motion over the past two years. This continuity, though passive, has helped preserve the gains made.

Amid the political contestation over who deserves credit for the economic stabilisation, one truth stands out: Sri Lanka’s turnaround is rooted not in politics, but in the application of sound economic policy.

Let us not forget the chaos of the recent past. During the Covid-19 crisis and its aftermath, policies such as import controls, arbitrary currency pegging, and a misplaced reliance on Modern Monetary Theory (MMT) for deficit financing led us to the brink of collapse. We banned imports of everything from vehicles to turmeric and foreign reserves fell to critically low levels. In 2022, inflation peaked at a staggering 70% and we defaulted on our sovereign debt.

In contrast, 2024 tells a very different story. Imports have been liberalised, the Sri Lankan Rupee has appreciated, and annual inflation has dropped to just 1.2% – a sharp fall from the 42% recorded in 2022. Foreign reserves have risen to $ 6.1 billion and investor confidence is slowly returning.

If import bans and deficit monetisation were truly effective tools for reserve accumulation and currency stability, today’s numbers should be worse, not better. What changed is not just the numbers but the mindset.

The real driver behind this turnaround has been institutional reform and disciplined economic policy-making. The passage of the CBSL Act of 2023, which established the institution’s independence – though not perfect – was instrumental. It marked a break from the belief that the CBSL should finance the Government or steer economic growth through monetary accommodation. Restoring the CBSL’s credibility and prioritising price stability has laid the foundation for today’s macroeconomic stability.

However, we are far from the finish line. Stability is a prerequisite, not a destination. Without deeper structural reforms, this fragile recovery can quickly unravel.

Reforms in land use, labour markets, and immigration are essential for long-term growth. The Economic Transformation Act, parts of which are yet to be implemented, must be expedited to attract foreign investment and create job opportunities for Sri Lankans.

Meanwhile, we must interpret some headline statistics with caution. For instance, Sri Lanka’s per capita GDP is now estimated at $ 4,500 – a significant increase. But this is partly due to demographic shifts; population growth has slowed, with increased emigration and declining birth rates. The Department of Census and Statistics now estimates the population at just over 21 million. Additionally, a stronger exchange rate and subdued inflation have boosted the dollar value of nominal GDP.

Yes, economic growth in 2024 stands at 5%, but we must be mindful of the base effect. Following two consecutive years of contraction, this figure reflects a rebound from a low base, not a high-growth trajectory.

Still, the numbers on inflation, reserves, and interest rates underscore a clear commitment to macroeconomic stabilisation. Even the returns to the Employees’ Provident Fund (EPF) have improved, an indirect benefit of preserving the value of money, or what economists call ‘sound money.’

The bottom line: this recovery is the result of disciplined policy, not political manoeuvring. But policy cannot stand alone. Without a resilient institutional framework, good policies can be reversed with the next election cycle. We often adopt ‘scientific policy’ only when a crisis forces our hand. That culture must change.

As the country prepares for the upcoming Local Government Elections, it is crucial for the Government to demonstrate that it is serious about reforms and institutional strengthening. Assuming that 2025 will bring equally good numbers by doing more of the same is not just naive, it is dangerous. Without changing gears, we risk reversing the progress made and returning to instability.