Sri Lanka’s economy is projected to contract further in 2023 before it begins a gradual recovery in 2024, as the country navigates an appalling economic crisis, said the Asian Development Bank (ADB) in its annual flagship economic publication, the Asian Development Outlook (ADO) April 2023.
According to the report, the economy contracted by 7.8% in 2022 and is forecast to contract by 3% in 2023 as it continues to struggle with the challenge of debt restructuring and balance of payments difficulties.
The ADB says reform measures, such as the reversal of the tax cuts of 2019, and the recent approval of the International Monetary Fund’s (IMF) Extended Fund Facility arrangement will support the country’s efforts to stabilize its economy.
Sri Lanka’s recovery from the crisis hinges on timely progress on debt relief and steadfast implementation of reforms, stated the ADB.
In 2022, foreign currency scarcity led to shortages of essentials and triggered an acute energy crisis with prolonged power cuts and transport bottlenecks due to lack of fuel, which Sri Lanka needs to import. Inflation soared and eroded living standards, pushing many into poverty.
“Sri Lanka has a long road to recovery, and it will be critical to ensure the poor and vulnerable are protected,” said Deputy Country Director for Sri Lanka Utsav Kumar.
“It is imperative that the country address the root causes of internal and external imbalances, for which an unwavering commitment to reforms is essential,” he further noted.
The ADB stressed that the needed reforms include enhancing domestic resource mobilization, improving the performance of state-owned enterprises to reduce their fiscal burden, strengthening public financial management, and encouraging private sector activities through harmonizing trade and investment policies.
The ADB deemed improving governance and accountability mechanisms, such as strengthening anticorruption legislation, building strong institutions, and increasing transparency, essential to address Sri Lanka’s economic vulnerability.
Source By themorning.lk
