New Delhi

The World Bank has announced a positive outlook for the Sri Lankan economy, which has stabilised following a severe crisis in 2022. With critical structural and policy reforms in place, the country is expected to experience a growth rate of 4.4 per cent in 2024, significantly higher than the previous projection of 2.2 per cent. However, the World Bank has also warned that while the situation is improving, Sri Lanka is not yet fully out of danger.

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Gevorg Sargsyan, the World Bank's country director, highlighted the encouraging news during a recent press briefing as detailed in a report by the Press Trust of India. He noted that the economy has shown resilience by growing faster than anticipated but cautioned that challenges remain. "The good news is that it grew faster than most expected but the not so good news is that it is not out of the woods yet," Sargsyan stated.

The backdrop to this recovery includes Sri Lanka's declaration of its first-ever sovereign default in April 2022, marking a significant milestone since gaining independence from Britain in 1948. The country is currently engaged in negotiations with the International Monetary Fund (IMF) regarding the next tranche of a $2.9 billion bailout package. The IMF has made external debt restructuring a condition for further financial assistance.

In its bi-annual Sri Lanka Development Update titled "Opening Up to the Future," released on Thursday i.e., October 10, the World Bank cautioned that the recovery remains fragile and dependent on maintaining macroeconomic stability, successfully restructuring debt, and continuing structural reforms aimed at boosting medium-term growth and reducing poverty.

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Sargsyan pointed out that Sri Lanka achieved remarkable milestones in 2023, including four consecutive quarters of growth and a current account surplus. He also mentioned that there is untapped export potential estimated at USD 10 billion annually, which could create approximately 150,000 new jobs if the necessary reforms are implemented effectively.

Looking ahead, the World Bank report projects modest growth of 3.5 per cent for 2025, with poverty levels expected to gradually decline but remain above 20 per cent until at least 2026. This highlights ongoing economic challenges that will need to be addressed to ensure sustainable progress.

The newly elected government led by President Anura Kumara Dissanayake has committed to adhering to the IMF's stringent bailout programme initiated by his predecessor Ranil Wickremesinghe. However, Dissanayake has expressed intentions to renegotiate some of the tougher conditions that have placed significant economic burdens on the citizens of the country as he prepares for upcoming elections.

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Therefore, as Sri Lanka navigates its path towards recovery, it remains crucial for the government and policymakers to implement effective reforms and maintain stability to foster sustainable economic growth and alleviate poverty in the coming years.