Economic Challenges of Post-Tsunami Reconstruction in Sri Lanka

This paper emphasizes the need for formulation of a phased program of reconstruction after a natural disaster. The paper:

• Analyzes the priority issues emerging from Sri Lankas experience of post-tsunami reconstruction and rehabilitation;
• Aims to contribute to the discussions and debates on appropriate policies for the medium-term reconstruction effort;
• Draws on a survey of affected households in an attempt to obtain a broader understanding of the perceptions of the recovery process at the grass-roots level.

The paper states that:

• After successful emergency relief operations, Sri Lanka initiated post-tsunami reconstruction with confidence and expected rapid recovery, however, these expectations turned out to be overly optimistic;
• Coordination problems between agencies, constraints on aid absorption capacity, and inequities in aid distribution among regions have hampered reconstruction;
• Infrastructure reconstruction targets have not been fully met;
• Initial expectations that the tsunami experience would lead to peace were not fulfilled and large-scale conflict has resumed;
• Macroeconomic management and efficient absorption of a large, necessarily temporary, inflow of foreign funds has been a daunting task;
• Construction costs have rapidly escalated, producing unanticipated funding gaps and aggravating fiscal deficit problems.

The paper concludes that the Sri Lankan experience highlights the need for:

• Anticipation of such cost increases when assessing needs following major disasters;
• Formulation of a phased program of reconstruction which takes into account the supply side constraints of construction inputs.