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Sri Lanka’s Economy Stabilized – World Bank

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Sri Lanka’s economy has stabilized, with growth expected to reach 4.4 percent in 2024, surpassing earlier forecasts. This positive outlook follows four consecutive quarters of growth driven by the industrial and tourism sectors and supported by critical structural and policy reforms, says the World Bank.

Released today, the World Bank’s bi-annual Sri Lanka Development Update, titled Opening Up to the Future, cautions that the recovery remains fragile and hinges on maintaining macroeconomic stability, successfully restructuring debt, and continuing structural reforms to increase medium-term growth and reduce poverty. Key reforms aimed at boosting exports, attracting foreign investment, enhancing female labor force participation, improving productivity, and addressing challenges such as poverty, food insecurity, and vulnerabilities in the financial sector are crucial for achieving more inclusive and sustainable growth.

The report underscores the country’s potential for achieving higher and sustainable growth through trade. Sri Lanka has an untapped export potential estimated at $10 billion annually, which could create approximately 142,500 new jobs. There is significant opportunity for diversifying and expanding exports in manufacturing, services and agriculture, provided the necessary reforms are implemented.

“Sri Lanka’s recent economic stabilization, marked by four quarters of growth and a current account surplus in 2023, is a significant milestone,” said David Sislen, World Bank Regional Country Director for Maldives, Nepal, and Sri Lanka.  “At this moment, Sri Lanka has a real opportunity to realize its export potential, which we estimate at $10 billion annually. There is an opening for Sri Lanka to deepen its participation in global value chains and take advantage of its geography and an evolving global landscape to generate jobs and sustain growth. The continued implementation of important economic and governance-related reforms will allow Sri Lanka to fully benefit from this moment.”

Looking ahead, the report projects a modest growth of 3.5 percent in 2025. Growth is then expected to follow a modest path over the medium term due to the scarring effects of the economic crisis. Poverty is expected to gradually decline but remain above 20 percent until 2026. Inflation is likely to stay below the central bank’s target of 5 percent in 2024, gradually increasing as demand picks up. The current account is projected to remain in surplus in 2024, driven by tourism and remittances.

The Sri Lanka Development Update is a companion piece to the South Asia Development Update, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia region and analyzes policy challenges faced by countries in this region. The October 2024 edition, Women, Jobs, and Growthprojects growth of 6.4 percent in South Asia this year, making it the fastest-growing EMDE region in the world. Increasing women’s participation in the labor force and opening further to global trade and investment could help the region grow even faster and achieve its development goals, says the World Bank’s regional outlook.

Source – World Bank

Economy

Sri Lanka prints Rs100bn through open market operations

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Sri Lanka’s central bank has injected around 100 billion rupees against domestic assets through multiple liquidity tools by October 25 official data show, driving up excess money in the banking system to over 190 billion rupees.

The central bank injected 36.16 billion rupees through an overnight auction and 70 billion rupees for 7 days through a term auction of printed money.

By October 25, excess liquidity deposited in the central bank’s standing facility was 193.4 billion rupees, up from 138 billion rupees a month earlier.

Economynext – https://economynext.com/sri-lanka-prints-rs100bn-through-open-market-operations-184982/

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Economy

President appoints two senior economic advisors on honorary basis

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President Anura Kumara Dissanayake has appointed the Chairman of the Ceylon Chamber of Commerce, Duminda Hulangamuwa and Prof. Anil Fernando of the Sri Jayawardenapura University as Senior Advisors for Economic Affairs and Finance on honorary basis.

Cabinet Spokesman Minister Vijitha Herath said the appointments, effective September 24, 2024, come with the consensus of the Cabinet of Ministers.

He said both appointments were honorary without a salary payment or other benefits.

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IMF to work with new President AKD, welcomes creditor deal

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The International Monetary Fund (IMF) has said it looks forward to working with newly elected President Anura Kumara Dissanayake and welcomed the recent announcement of an agreement in principle between Sri Lanka and a group of its international bondholders to restructure $ 12.5 billion in bonds.

“We look forward to working together with President Dissanayake and his team towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery,” a spokesperson for the fund said.

IMF said it will discuss the timing of its third review of the current program with Sri Lanka “as soon as practicable.” Full statement by the IMF spokesman: “We look forward to working together with President Dissanayake and his team towards building on the hard-won gains that have helped put Sri Lanka on a path to economic recovery since entering one of its worst economic crises in 2022.”

“We welcome the announcement of an agreement in principle between Sri Lanka and international bondholders’ representatives, subject to confirmation on comparability of treatment by Sri Lanka’s Official Creditors Committee. This represents significant progress in Sri Lanka’s debt restructuring process.”

“We will discuss the timing of the third review of the IMF-supported program with the new administration as soon as practicable.”

Source – DailyFT

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