COLOMBO (AFP) – Cash-strapped Sri Lanka’s economy was recovering faster than expected, the World Bank said yesterday, doubling the island’s growth forecast to 4.4 per cent for 2024.
Tourism and financial services had bounced back, along with improvements in construction, leading to the Bank’s upward revision of the forecast of 2.2 per cent made in April.
Sri Lanka’s growth is expected to moderate next year to 3.5 per cent and a slower 3.1 per cent in 2026, the bank said.
The island’s 4.4 per cent growth forecast for 2024 was, however, lower than the South Asia region’s 6.4 per cent, revised data of the World Bank showed. The bank “cautions” that Sri Lanka’s recovery remained fragile and hinged on maintaining stability.
It also called for completing a restructure of Sri Lanka’s external debt and continuing reforms to increase medium-term growth and reduce poverty.
The international lender on Monday granted a new USD200 million loan to bolster economic recovery, the first foreign funding since leftist President Anura Kumara Dissanayake won elections.
Dissanayake took power last month on the back of public anger over the island’s 2022 economic meltdown and promising to reverse steep tax hikes.
The new administration is maintaining a USD2.9 billion International Monetary Fund (IMF) bailout, but has said it will renegotiate some of the harsh austerity measures. Sri Lanka defaulted on its external debt in 2022 after running out of foreign exchange to finance even the most essential imports such as food, fuel and medicines.
Months of street protests against acute shortages led to the toppling of then leader Gotabaya Rajapaksa. The World Bank has previously said the island’s economic crisis had almost doubled the number of people pushed into poverty, or living on less than USD3.60 a day.
About 13 per cent of Sri Lanka’s 22 million population lived in poverty just before the 2022 crisis. The poverty figure almost doubled to 25.9 per cent in 2023.
The World Bank expects poverty levels to remain high for the next two years.
