IMF Forecasts A 3% Contraction In Sri Lanka's Economy During 2023
According to the latest forecast by an IMF official, the economy of Sri Lanka will contract by 3% during 2023. The reason for this is the weak external and internal environment. These views were expressed by the director of the Asia Pacific Department at IMF.
Right now, a team from IMF is in Colombo to provide regular consultations. This will be followed by a review mission for the firs time this year. During the regular consultations, the IMF team met with a lot of Sri Lankan officials, including the country's finance minister.
Coming Out Of Default - A Tough Road Ahead
Sri Lanka secured a $2.9 billion worth of bailout package from the IMF and is trying to get out of the current financial crisis. If we look at history, Sri Lanka faced the worst financial crisis for the first time since 1948 (independence).
In such circumstances, these comments from the IMF reveal that problems are still present in Sri Lanka's battered economy.
On April 2022, the Island nation opted to default on its foreign debt. And ever since then, the country has been facing tough financial conditions & is trying its best to get out of the situation.
During the first meeting with IMF, the authorities from Sri Lanka asked for debt treatment. One key thing to note here is that the meeting also included members from Paris Club and India.
In addition, China also participated in the meeting as an observer. It is also worth noting here that China is one of the largest bilateral lenders in Sri Lanka, which also invested heavily in various infrastructure projects.
In 2023, the inflation in Sri Lanka is expected to be 28.51% which is quite a high amount. In addition, the interest rate in the country now stands at 15.5%, which is also hindering economic progress.
However, we also need to consider the fact that Sri Lanka can't take independent financial decisions without the consultation of IMF and other lenders. Otherwise, it would put the current IMF program at risk & thus bring more financial trouble.