BackCrisis-hit Sri Lanka to see economic contraction in 2023: Report
Sri Lanka's economy contracted by 7.8% in 2022. It will further decline this year before witnessing a gradual recovery in 2024.
PremiumCrisis-hit Sri Lanka is estimated to see a contraction in its economic growth this year, according to Asian Development Bank (ADB) data. However, the country which is struggling with an unprecedented economic crisis will begin a gradual financial recovery in 2024.
In 2022, Sri Lanka's economy contracted by 7.8% and is further expected to shrink by 3% in 2023 as it continues to grapple with the challenge of debt restructuring and balance of payments difficulties, as per ANI reports.
ADB stated that reform measures such as the reversal of the tax it cut in 2019, and the recent approval of the International Monetary Fund's (IMF) loan arrangement will support the country's efforts to stabilize its economy.
The Washington-based financial body has recently approved a 48-month arrangement under the Extended Fund Facility of about USD 3 billion to support Sri Lanka's economic policies and reforms.
Sri Lanka's recovery from the crisis now hinges on timely progress on debt relief and implementation of economic reforms.
The needed reforms, according to the development bank's Asian Development Outlook (ADO) April 2023 report, include enhancing domestic resource mobilization, improving the performance of state-owned enterprises, strengthening public financial management, encouraging private sector activities, strengthening anticorruption legislation, building strong institutions, and increasing transparency.
The country entered into the crisis due to various policy missteps, foreign reserves scarcity-led shortages of essentials, power, and energy - which it imports, and subsequent inflation, it said as quoted by ANI.
ADB's Deputy Country Director for Sri Lanka Utsav Kumar said that Sri Lanka has a long road to recovery, and it will be critical to ensure the poor and vulnerable are protected.
"The country must address the root causes of internal and external imbalances, for which an unwavering commitment to reforms is essential," he added.
Established in 1966, ADB said it is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.
(With ANI inputs)
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