13 June 2023 02:03 am Views - 235
Ranjith Siyambalapiriya
Despite various negative projections by multilateral agencies and even by the country’s Central Bank, Sri Lanka would record positive economic growth in the final quarter of this year, Finance State Minister Ranjith Siyambalapiriya said.
Last week, the World Bank projected Sri Lanka’s economy to contract by 4.3 percent this year, before recording a 1.2 percent positive growth in the first quarter of 2024.
The International Monetary Fund (IMF) expects Sri Lanka’s economy to shrink 3.1 percent this year.
The Central Bank also forecasted that that the country’s economic growth would contract by 2-3 percent.
Sri Lanka’s GDP contracted 7.8 percent in 2022, on the back of the worst economic crisis experienced by the country in its post-independent history.
“Although various international financial institutions made various predictions, last year too, the country’s economy was able to exceed those predictions. Economic growth in this country will be positive in the last quarter of this year,” Siyambalapitiya said.
Sri Lanka’s economy has achieved some stability, following its US $ 3 billion deal with the IMF.
The debt standstill that was announced in April 2022, import restrictions and higher dollar inflows by way of workers’ remittances and tourism, have eased the shortages in the domestic foreign exchange market.
The country’s gross foreign reserves had crossed US $ 3.5 billion by end-May, from near zero levels 12 months ago.
The headline inflation has also decelerated significantly after almost hitting 70 percent last year to below 30 percent levels, albeit largely on higher based effects, last year. The Central Bank expects inflation to come down to single-digit levels by the final quarter of this year.
Amid strong inflows and due to the demand destruction policies, the rupee has gained 24 percent against the dollar.
The Central Bank on June 1 announced a surprise 250-basis-point cut to policy rates, signalling an end to the nearly two-year-long policy tightening cycle, keeping the door open for further rate cuts in the coming months, to reverse economic contraction.