ECONOMYNEXT – Sri Lanka’s economy has stabilized, and growth is now emerging, due to macroeconomic reforms, State Minister of Finance Shehan Semasinghe said.
“After a contraction of 7.8% in 2022, the GDP returned to growth in the 3rd and 4th quarters of 2023, with Q4 GDP growth reaching 4.5%,” Semasinghe said on X.
“Recognizing the progress in macroeconomic reforms, the measures to stabilize the economy have thus far been successful. The government is now in the process of transitioning the economy to a new growth path.”
The strengthening of the Sri Lankan Rupee will make the purchasing of goods and services cheaper over time, Semasinghe said.
“This will lead to increased purchasing power, helping to alleviate inflationary pressures and contribute to price stability and financial system stability.
“Importantly reduce the burden of debt servicing of the country.”
Sri Lanka defaulted on official credit in April 2022 after money printed to keep an artificially low policy rate depleted forex reserves, but the country had to repay multilateral lenders and banks and to repay counterparties.
Maintaining exchange rate (and balance of payments) stability, which involves sequencing external payments to domestic investments through a market driven interest rate is a simple matter as long as politicians are willing to bring laws against macro-economists to curtail ‘macro-economic policy’, analysts say.
After debt is restructured in Sri Lanka in 2024, foreign inflows to the government resumes, the financial account could turn positive and the current account into deficit, analysts say. (Colombo/April27/2024)