Masters of Business Administration

MBA 2022-24 Term 3

Subject: Strategic Management

Group Assignment 2 Report

Submitted To:
Prof. Punit Saurabh

Submitted by:
Group- 8
Section: C

1 221331
Mohit Anand
2 221341
Purvardh Kaushik

3 221348
Satyam Sanwal
4 221355
Soham Karandikar

5 221356
Tanmay Mandaliya
 Index
Sr. No. Title Page No.
1 Common challenges faced by Sri Lanka are as 3
follows:
2 Sri Lanka Economic Growth 4
3 General suggestions for Sri Lanka 5
4 Major Problems and Proposed Solutions 6
5 Conclusion 11

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Country: Sri Lanka
Common challenges faced by Sri Lanka are as follows:
Severe economic crisis, characterized by a rapid depreciation of the national currency, high
inflation, and a significant increase in public debt.
This crisis was exacerbated by the COVID-19 pandemic, which led to a decline in tourism
revenue, a crucial sector for the Sri Lankan economy.
The government also faced criticism for its handling of the pandemic, including allegations of
mismanagement and corruption.
Additionally, there were concerns over the erosion of democratic institutions and freedoms,
including media freedom and the independence of the judiciary.

What has been happening in Sri Lanka?

In April, protests began in the nation's capital, Colombo, and quickly expanded. Daily power
outages and shortages of necessities like fuel, food, and medications have been a struggle for
the populace.
The rate of inflation has surpassed 50%.

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According to officials, there isn't enough fuel in the country to provide key services like buses,
trains, and medical vehicles, and there isn't enough foreign cash to import more, either.
Petrol and gasoline prices have increased significantly as a result of the fuel shortage.
For two weeks in late June, the government outlawed the selling of gasoline and diesel for non-
essential cars. Fuel sales are still severely constrained.
People have been urged to work from home in order to conserve supplies, and schools have
been closed.

Sri Lanka Economic Growth

Sri Lanka's economy is not doing well right now. The nation is struggling with high levels of
debt and unemployment, and recent GDP growth has been sluggish. Another issue is inflation,
which has caused the Sri Lankan rupee to depreciate against important currencies like the US
dollar1. The most recent Sri Lanka Development Update and South Asia Economic Focus
predict that Sri Lanka's real GDP will decline by 9.2 percent in 2022 and an additional 4.2
percent in 20232.

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General suggestions for Sri Lanka
1. Addressing Sri Lankans’ immediate needs:
This includes giving the crisis-affected population food and other essentials of life. The
government ought to offer financial aid to people who lost their jobs as a result of the
crisis.
2. Balancing the budget:
The government should take action to lower costs and boost revenue. This can be
accomplished by raising taxes and reducing wasteful spending.
3. Restructuring Sri Lanka’s huge debt:
The massive debt load facing Sri Lanka needs to be handled. Along with its creditors,
the government should restructure its debt and develop a strategy for paying it off.
4. Garnering public support for reforms:
The administration ought to make an effort to win the public's backing for its economic
reforms. This can be accomplished by informing the populace of the necessity of these
reforms and their long-term advantages for the nation.

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Major Problems and Proposed Solutions

Problem 1 - Fiscal discipline: The government needs to adopt strict fiscal discipline measures
to reduce public spending, cut unnecessary subsidies, and prioritize investments in critical areas
like education, health, and infrastructure.
1. Attract foreign investments: The government can take steps to attract foreign
investment by improving the business environment, reducing bureaucracy, and
promoting Sri Lanka's competitive advantages such as its strategic location, skilled
workforce, and abundant natural resources.
2. Increase exports: Sri Lanka can boost its export earnings by promoting export-oriented
industries, diversifying its export base, and improving the quality and value-added of
its export products.
3. Strengthen the financial system: Sri Lanka can strengthen its financial system by
promoting financial sector reforms, increasing transparency, and improving the
regulatory framework to promote stability and confidence in the banking system.
4. Invest in human capital: The government can invest in education and skills
development to improve the quality and productivity of the workforce, which will help
attract higher-paying jobs and foreign investments.

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Problem 2 - A rapid depreciation of the national currency
1. Monetary Policy: The Central Bank of Sri Lanka can implement measures to tighten
monetary policy, such as increasing interest rates, which can attract foreign investors
and strengthen the currency.
2. Fiscal Policy: The government can adopt fiscal policies such as reducing government
spending, increasing taxes, and implementing structural reforms to boost the economy's
competitiveness.
3. Currency Intervention: The Central Bank can intervene in the foreign exchange
market by buying or selling foreign currencies to stabilize the currency.
4. Attracting Foreign Investment: Encouraging foreign investment can help increase
foreign exchange reserves, which can stabilize the currency.
5. Promoting Exports: Encouraging exports can increase foreign exchange earnings and
reduce the demand for foreign currency, which can help stabilize the currency.
6. Structural Reforms: Implementing structural reforms, such as improving the business
climate, strengthening the financial sector, and addressing corruption and
inefficiencies, can help increase investor confidence and attract foreign investment.

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Problem 3 – Inflation
Apart from monetary policy and fiscal policy measures which are addressed above Sri Lanka
can do the following thing
1. Exchange Rate Policy: The government can also consider implementing policies to
stabilize the exchange rate, which can help reduce inflationary pressures. This can be
achieved by managing the supply and demand for foreign exchange and by reducing
the country's dependence on imported goods.
2. Social Safety Nets: The government can also consider implementing social safety nets
for vulnerable populations who are disproportionately affected by inflation, such as
low-income households. These safety nets can include measures such as food subsidies
and cash transfers.

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Problem 4 – Increase in debt
1. Fiscal consolidation: The government could undertake measures to reduce public
spending and increase revenue, such as by implementing tax reforms, reducing
subsidies, and improving tax collection.
2. Debt restructuring: The government could renegotiate its debt agreements with
creditors to reduce the burden of debt repayment. This could involve extending the
repayment period, reducing interest rates, or writing off some of the debt.
3. Promoting economic growth: The government could focus on policies and initiatives
that promote economic growth, such as investing in infrastructure development,
improving the business environment to attract foreign investment, and increasing
productivity.
4. Strengthening institutions: The government could strengthen institutions that play a
role in managing public debt, such as the central bank, finance ministry, and debt
management office. This could involve improving transparency, accountability, and
governance standards.
5. Seeking international assistance: The government could seek financial assistance
from international organizations, such as the International Monetary Fund (IMF), to
help address the debt crisis.

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Problem 5 - Decline in tourism revenue
1. Implementing effective COVID-19 control measures: Sri Lanka could focus on
implementing effective measures to control the spread of COVID-19 within the country,
which could help to restore confidence in travellers. This could include measures such as
widespread testing, contact tracing, and vaccination campaigns.
2. Promoting domestic tourism: While international travel has been severely impacted by
the pandemic, domestic tourism could be promoted as an alternative source of revenue
for the country. This could include promoting local attractions and offering incentives for
Sri Lankan citizens to travel within the country.
3. Diversifying tourism offerings: Sri Lanka could consider diversifying its tourism
offerings beyond the traditional focus on beach tourism. This could include promoting
cultural and eco-tourism attractions like national parks, historical sites, and traditional arts
and crafts.
4. Improving infrastructure: Sri Lanka could invest in improving its tourism
infrastructure, such as transportation, accommodations, and tourist facilities. This could
help to attract more high-spending tourists and increase the country's overall
competitiveness in the global tourism market.
5. Collaborating with other countries: Sri Lanka could consider collaborating with other
countries in the region to promote joint tourism initiatives. For example, Sri Lanka could
work with neighbouring countries to offer multi-destination packages that encourage
travellers to visit multiple countries in the region.

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Conclusion
In conclusion, Sri Lanka is facing an economic crisis due to high levels of debt and
unemployment, slow GDP growth, and inflation. The government needs to take urgent steps to
address these issues and work with its creditors to restructure its debt. It also needs to gain the
support of the public for its economic reforms.

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