Sri Lanka economy stabilizes with emerging, says State Minister of Finance.
By: Staff Writer
April 28, Colombo (LNW): State Minister of Finance Shehan Semasinghe highlighted that the Sri Lankan economy has stabilized and growth is now emerging.
The Sri Lankan appreciation from Rs. 360 per USD in 2022 to Rs. 300 per USD at present.
He posted on X: “It is important to understand that exchange rates in Sri Lanka are market-determined which allows currency values to adjust according to supply and demand dynamics in the foreign exchange market”.
He said that strengthening of the Sri Lankan Rupee will make purchasing of goods and services cheaper over the period.
He added: “This will result in increased purchasing power, help reduce inflationary pressures and contribute to price stability and stability in the financial system. Importantly reduce the burden of debt servicing of the country”.
The State Minister said that the GDP which contracted 7.8% in 2022 returned to growth in the 3rd and 4th quarters of 2023, with Q4 GDP growth reaching 4.5%.
He says recognising progress in macroeconomic reforms, the measures to stabilise the economy have been thus far been successful, and the government is now in the process of shifting the economy to a new growth path.
Sri Lanka’s economy is projected to see moderate growth of 2.2% in 2024, showing signs of stabilization, following the severe economic downturn of 2022. But, the country still faces elevated poverty levels, income inequality, and labor market concerns, says the World Bank’s latest bi-annual update.
The Sri Lanka Development Update, Bridge to Recovery, highlights that Sri Lanka saw declining inflation, higher revenues on the back of the implementation of new fiscal policies, and a current account surplus for the first time in nearly five decades, buoyed by increased remittances and a rebound in tourism.
However, poverty rates continued to rise for the fourth year in a row, with an estimated 25.9% of Sri Lankans living below the poverty line in 2023. Labor force participation has also seen a decline, particularly among women and in urban areas, exacerbated by the closure of micro, small, and medium-sized enterprises (MSMEs).
Households are grappling with multiple pressures from high prices, income losses, and under employment. This has led to households taking on debt to meet food requirements and maintain spending on health and education.
“Sri Lanka’s economy is on the road to recovery, but sustained efforts to mitigate the impact of the economic crisis on the poor and vulnerable are critical, alongside a continuation of the path of robust and credible structural reforms,” emphasized Faris Hadad-Zervos, World Bank Country Director for Maldives, Nepal and Sri Lanka.
