Lalith Samarakoon is a professor of finance and the Chair of the Department of Finance of the Opus College of Business at the University of St. Thomas in the Twin Cities, Minnesota. He is the former Secretary-General and the Chief Economist of the National Economic Council of Sri Lanka. Samarakoon’s primary area of research and teaching is international finance and economics, with a particular focus on emerging markets. He also serves as the editor of the Journal of Emerging Financial Markets and Policy.

What Broke the Pearl of the Indian Ocean? The Causes of the Sri Lankan Economic Crisis and its Policy Implications
Sri Lanka unilaterally defaulted on its external debt in April 2022, exposing its long-standing economic and financial vulnerabilities and igniting a series of inter-related multiple economic crises—fiscal, debt, currency, inflation, and balance of payments—as well as a vast socio-political upheaval. This paper analyses the economic crisis and its various dimensions to understand the sources of the crisis and draw policy implications. The role of fiscal balances and public debt in the crisis, along with debt sustainability, international sovereign bonds, liquidity crisis, and currency collapse, are analyzed. The root cause of Sri Lanka’s economic crisis was running persistent and large fiscal deficits, which were increasingly financed by unsustainable public debt, particularly foreign commercial borrowings. A substantial reduction and reprofiling of debt through restructuring of both domestic and foreign debt to ensure debt sustainability, meaningful fiscal policy reforms anchored by revenue increases and expenditure rationalization to reduce fiscal deficits, and deep growth-enhancing structural reforms are necessary for medium-term rescue and recovery and long-term growth and stability of Sri Lanka. The findings provide important policy lessons for other emerging markets and middle-income economies.
(Samarakoon, Lalith, 2024, Journal of Financial Stability, 70: 1-18. https://doi.org/10.1016/j.jfs.2023.101213)

This study examines the impact of the U.S. stock market on foreign stock markets during the COVID-19 pandemic in order to understand the nature and magnitude of financial contagion. It estimates stock market interdependence during normal times and contagion during the crisis after controlling for changes in COVID cases and stringent measures implemented by countries using data from 98 countries covering the COVID-19 pandemic from February 2020 to December 2021 and the preceding normal period of two years. The changes in the COVID cases are negatively related, and the stringent measures are positively related to the stock returns of many countries. There is evidence of large and positive contagion from the U.S. to the countries most affected by the pandemic. Positive contagion is more pronounced in Canada and Europe, particularly in Northern and Southern Europe, followed by the Middle Eastern countries. However, the contagion to the Asian markets, such as China and Japan, is significantly negative, while the East Asian markets show the largest negative contagion, suggesting a decoupling of these markets during the crisis. Although the pandemic has been a pervasive event that affected all economies to varying degrees, the volatility in the U.S. stock market has spilled over to many of them even after considering domestic pandemic conditions. Financial contagion from a systemic global health crisis does not seem different from the experience of previous global financial crises, clearly demonstrating the effects of globalization.
(Samarakoon, Lalith P., Working Paper, University of St. Thomas, 2023)

Sri Lanka’s Debt Restructuring and Outlook
Webinar of Rebuilding the Sri Lankan Economy: Policies and Outlook, Sri Lanka Finance Association, July 25, 2024.

Sri Lanka’s Economic Crisis: Lessons and Policy Implications
Keynote at Institute of Chartered Accountants of Sri Lanka Annual Research Symposium 2023, January 19, 2024.

The Sri Lankan Crisis: Lessons for Developing Countries
Keynote Address at Webinar at University of Chittagong, Bangladesh, August 10, 2023

Debt Crisis and Sustainability of Public Finance in Sri Lanka
Keynote Address at the Emerging Financial Markets and Policy Conference 2023, University of Jaffna, Sri Lanka, June 23, 2023