Indrajith Coomaraswamy, an economist who has been at Sri Lanka's central bank, finance ministry and at the Commonwealth Secretariat said borrowing in commercial markets required good policy and transparent reporting.
"Now that we are exposed to the market and rating agencies even if we keep our house well, there could be exogenous shocks," Coomaraswamy told a forum in Colombo organized by the Sri Lanka Association of Exporters.
"We have to take timely action. If the oil price goes up, pass it through. If we don't we have to do more difficult actions later."
In 2011 a balance of payments crisis was triggered by high domestic credit growth and a sudden spike in borrowings by state energy firms, which did not raise prices.
Energy price deceptions became a key part of Sri Lanka's economic policy in 2004 under a policy put forward by Marxist-Nationalist Janatha Vimukthi Peramuna called 'removing the World Bank plug', which called for the lifting of a monthly fuel price adjustment formula.
The Ceylon Electricity Board, which had to generate large amounts of thermal power from the second quarter of 2011 due to failed rains also skipped raising prices in both June 2011 and January 2012, though there was a regulatory process to do so.
Sri Lanka turned to bond markets that did not impose 'conditions' ahead of time like the World Bank and IMF and rapidly ratcheted up commercial borrowings.
Borrowings now include about 2.5 billion US dollars worth rupee debt and a similar amount of dollar denominated debt.
While dollar denominated debt can only be sold to buyers with dollars, and become a problem only at maturity, a run by rupee bond holders can push the domestic currency down and cause severe tightening in credit markets.
Coomaraswamy said the pain imposed by fleeing creditors on some other countries have been much worse than the adjustments required by multilateral lenders.
In later 2008 Sri Lanka faced a severe crisis, triggered by a pullout of bond buyers and also state deficit spending.
During the current crisis Sri Lanka's rupee bond buyers usually referred to as 'hot money' have so far been cool and waited through a near 10 percent devaluation, from around 110 rupees to 120 levels against the dollar.
The rupee weakened below 122, to an all time low on Tuesday prompting state banks to sell dollars.
Coomaraswamy said the adjustments done by authorities including fuel price hikes and rate ceiling would help but there may be pain ahead for the country in the short term.
A rate hike of 50 basis points lagged the markets, he said. Analysts have said monetary policy would require further tightening with private credit growth also strong.
But analysts says foreign bond buyers can force high spending rulers to take corrective action much more than domestic ones especially in countries like Sri Lanka where the largest bond buyers are forced savings funds of private citizens who have no control over them.