By:Staff WriterColombo (LNW): As its economy and finance stature grows in slow momentum, Sri Lanka maintains multi-alignment approach instead of non-alliance stance to geopolitics harnessing foreign fiscal support in 2023 amidst the stable political situation under the leadership of President Ranil Wickremasinghe.
The sensitive fiscal, external, and financial sector imbalances pose some uncertainty for the economic outlook.
Growth prospects depend on debt restructuring and growth enhancing structural reforms. At the same time, fiscal consolidation will likely diminish these prospects, with the fiscal deficit expected to gradually fall over the medium-term.
Monetary and Fiscal Authorities assured that any restructuring of domestic debt, made known to people as debt optimization, will be purely on a voluntary basis.
But this announcement by the Government sent fear-waves across the economy activating the panic sentiment of the people.
There was a fear that, due to this voluntary debt optimization, the public will lose a significant part of the financial assets they are holding, not necessarily in government securities.
Inflation is forecasted to come down from a high base as monetization of fiscal deficits is reined in.
The current account deficit is expected to decline owing to import compression, despite slowing exports due to weak global demand. Additional resources will be needed in 2023 and beyond to close the external financing gap.
The island nation’s inflation, is now coming down faster than expected. The interest rates from the peak easing down especially after Central Bank announced the complete debt restructuring process.
The market interest rates will come down faster so in the second half, interest rates would be normalized in line with the inflation expectations prediction which is a single digit towards the end of the fourth quarter this year,” Central Bank said.
Around slightly over five years into 2023, and India is well underway with preparations for a pivotal year.
With all eyes on Sri Lanka, The government may be increasingly sensitive to global insights of how it handles possible shocks — external or internal — ranging from escalation on its borders to incidents of provoked youth violence of Aragalaya at Galle Face green.