Sri Lanka has a plan to collect more rupees. The government has announced an ambitious strategy to raise tax revenue to at least 17% of GDP by 2031. On paper, this is encouraging news. Stronger public finances, reduced borrowing needs, and a more reliable revenue base are all things a recovering economy desperately needs. But there is a question that this plan does not answer — and it is perhaps the most important question of all. Where is the plan to earn more dollars?
Why Tax Collection Alone Is Not Enough
Improving domestic tax collection is a necessary step. Sri Lanka's tax-to-GDP ratio has historically been one of the lowest in Asia, and closing that gap will reduce the government's dependence on borrowing. It will also help restore credibility with international lenders and rating agencies. These are real benefits, and they should not be dismissed.
However, collecting more rupees does not automatically translate into earning more foreign currency. A government can become more efficient at taxing its citizens while the broader economy remains structurally vulnerable to external shocks. Sri Lanka's 2022 economic crisis was, at its core, a foreign exchange crisis. The country ran out of dollars. Fuel could not be imported. Medicine became scarce. Queues stretched for miles. That catastrophe was not caused solely by poor tax collection. It was caused by a chronic inability to earn enough foreign currency to pay for what the country needed from the world.
The Foreign Exchange Problem Is Structural
Sri Lanka's foreign exchange earnings have long depended on a narrow set of sources — garment exports, remittances from overseas workers, and tourism. Each of these is valuable. But each is also vulnerable. Tourism collapsed overnight when COVID-19 arrived. Remittances, while resilient, are tied to the fortunes of Sri Lankan workers abroad rather than to the productive capacity of the domestic economy. Garment exports, though significant, face growing competition from lower-cost producers across Asia and Africa.
What Sri Lanka has not yet built is a diversified, high-value export economy capable of generating the kind of sustained dollar inflows that provide genuine economic security. Countries that have successfully navigated similar crises — South Korea, Vietnam, Bangladesh in its own way — did so by making deliberate, strategic choices about what they would produce and sell to the world. They invested in industries, built export infrastructure, trained workforces, and created policy environments that attracted foreign investment into productive sectors.
Sri Lanka has not yet made those choices with the same clarity or commitment. And without a credible plan to do so, even a dramatically improved tax collection system will leave the country exposed to the next external shock.
What a Dollar-Earning Strategy Must Include
A serious plan to earn more foreign currency would need to address several interconnected challenges. First, it must identify which sectors have genuine export potential and provide targeted support to help them scale. Information technology and business process outsourcing have shown promise. So has high-value agriculture, specialty tea, and certain areas of manufacturing. These sectors need not just rhetoric but real investment in infrastructure, skills development, and regulatory reform.
Second, Sri Lanka must become a more attractive destination for export-oriented foreign direct investment. This requires consistent policy, a transparent legal environment, and competitive logistics. The country's ports and connectivity are assets, but they need to be matched by an investment climate that gives businesses confidence their capital will be safe and their operations will not be disrupted by sudden policy reversals.
Third, the country must invest in the human capital that drives export competitiveness. Engineering graduates, software developers, multilingual professionals, and skilled tradespeople are all in demand globally. Sri Lanka produces talented people, but too many of them leave. Retaining and attracting skilled workers requires not just salaries but economic opportunity and stability at home.
Both Plans Must Work Together
It would be wrong to frame this as a choice between collecting more rupees and earning more dollars. Sri Lanka needs both. A government that cannot fund itself cannot build roads, run schools, or maintain the institutions that underpin a functioning economy. Fiscal discipline is essential. The 17% GDP tax target is a meaningful goal worth pursuing.
But fiscal discipline without export growth is a treadmill. The country can become more efficient at managing its existing economic output without ever breaking through to a new level of prosperity. True economic resilience requires the ability to earn from the world — to sell goods and services that the global market values, and to bring those earnings home in currencies that can pay for imports, service debts, and fund development.
The Question That Demands an Answer
Sri Lanka's policymakers deserve credit for addressing the revenue side of the fiscal equation. But the harder question — how does this country earn more dollars? — remains largely unanswered in public discourse. It is time for that question to receive the same serious attention, the same strategic planning, and the same political commitment that tax reform has begun to attract. The plan to collect more rupees is on the table. Now Sri Lanka needs the plan to earn more dollars.