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Tuesday April 16th, 2024

Sri Lanka 2024 growth upgraded, but recovery path narrow, says World Bank

ECONOMYNEXT – Sri Lanka’s economy has stabilized by the recovery path which was narrow, World Bank officials said underlining the need to maintain stability and continue on the reform path.

The World Bank’s April 2024 Sri Lanka Development Update projected 2024 growth at 2.2 percent up from 1.7 percent projected last year and 2.5 percent for 2025.

Sri Lanka’s economy has stabilized and it was essential for stability and reforms to continue, Country Manager Chiyo Kanda told reporters Tuesday.

Sri Lanka’s inflation was low, interest rates were falling and the rupee was appreciating, World Bank’s Senior Country Economist Richard Walker said.

Results were already beginning to be seen, but there was unlikely to be a quick bounce back, he said.

Sri Lanka upcoming elections and the possibility of reform fatigue or reversals were, a key risk to the recovery path.

Related World Bank concerned over potential reform fatigue in Sri Lanka’s election year

Meanwhile the sudden poverty created from a currency collapse in 2022 was likely to persist for some time.

By 2026 World Bank was forecasting growth at 3.0 percent for 2026. The International Monetary Fund was also forecasting around the same level of growth.

Sri Lanka has to make sure that the debt restructuring was sufficiently deep to prevent repeated events in the future, he said.

“The modest economic recovery will likely be insufficient to reverse welfare losses experienced during the crisis, and the poverty rate is estimated to remain above 22 percent until 2026,” the report warned.

“Falling household spending on health and education is likely to impact future human capital, especially in poorer households.”

Extreme macro-economic policy (tax cuts on top of inflationary rate cuts to target potential output) drove the country to an external default in 2022, after quickfire currency crises in 2012, 2016 and 2018 boosted foreign borrowings and the central bank reserves also turned into net debt, analysts have shown.

The country has had a tendency to recover quickly from currency crises but this was the first external default. The are also possibility of global headwinds over fiscal and monetary risks in reserve currency countries, following years of loose policy analysts say. (Colombo/Apr02/2024)

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IMF urged Sri Lanka to preserve “hard earned gains” after economic crisis: State FinMin

ECONOMYNEXT – The International Monetary Fund has urged Sri Lanka to preserve the hard earned gains after an unprecedented economic crisis under the global lender’s programme, State Finance Minister Shehan Semasinghe said.

The Sri Lankan delegation led by Shehan Semasinghe met Kenji Okamura, the Deputy Managjng Director of the IMF on the first day of the IMF and  World Bank Spring meeting.

“Mr. Okamura commended the Sri Lankan authorities on strong programme implementation and excellent reform progress. He emphasised the need to preserve the hard earned gains Sri Lanka has experienced since the beginning of the IMF programme and continue strong ownership,” the State Minister said in his X (Twitter) platform.

He said the Sri Lankan delegation including Central Bank Governor Nandalal Weerasinghe and Secretary to the Treasury Mahinda Siriwardana explained the recent socio-economic developments to Okamura.

He also affirmed the IMF top official on the authorities’ commitment to ensuring continuity and consistency of macroeconomic policies and reforms undertaken under the programme. (Colombo/April 16/2024)

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Sri Lanka State FinMin meets BCIU in US; discusses post-crisis investment prospects 

ECONOMYNEXT – Sri Lanka’s State Finance Minister Shehan Semasinghe met Business Council for International Understanding( BCIU) in Washington on the sideline of the IMF/World Bank Spring Meetings late on Monday and discussed investment prospects in the island nation which is gradually recovering from an unprecedented economic crisis.
“Our discussion centered on the potential that Sri Lanka offers for international investors. Explored various sectors, including education, tourism, renewable energy, agriculture and technology, where strategic investments can drive sustainable economic growth and development,” Semasinghe said in his X (Twitter) platform. 
“We reviewed the current macro-economic landscape of Sri Lanka, including recent reforms that have transformed to results. Glad to concluded the forum by marking constructive dialogue and a shared commitment to support the economic development of Sri Lanka.” 
“We thank participants, stakeholders holders and global partners for the significant interest shown in unlocking the full potential of the Sri Lankan economy and fostering greater international understanding and cooperation.” (Colombo/April 16/2024) 
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India allows Sri Lanka to import 10,000MT of onions

ECONOMYNEXT – India has relaxed an export ban allowing 10,000 metric tonnes of onions to be shipped to Sri Lanka, the Indian High Commission in Colombo said.

“The exemption for Sri Lanka reiterated India’s Neighbourhood First policy, adding to the Sinhala and Tamil New Year festivities here,” the statement said.

Onion prices went up in Sri Lanka after India and Pakistan banned exports.

The Directorate General of Foreign Trade has issued a notice allowing National Co-operative Exports Limited to ship 10,000 MT of onions.

The UAE has also been allowed to import 10,000MT of onions on top of 24,400MT already permitted.

A large Indian and South Asian expat community lives in the UAE. (Colombo/Apr15/2024)

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