Sri Lanka’s economy shows signs of stabilization, but poverty remains elevated

2 April 2024 04:10 pm - 22 - {{hitsCtrl.values.hits}}

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April 02 - 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 while the country still faces elevated poverty levels, income inequality, and labor market concerns, said the World Bank's latest bi-annual update.

According to the Sri Lanka Development Update released today, 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. “This involves a two-pronged strategy: first, to maintain reforms that contribute to macroeconomic stability and second, to accelerate reforms to stimulate private investment and capital inflows, which are crucial for economic growth and poverty reduction.”

Looking forward, the report projects a modest pickup in growth of 2.5% in 2025, with a gradual increase in inflation and a small current account surplus. However, high debt service obligations are expected to exert pressure on fiscal balances. Poverty rates are anticipated to remain above 22% until 2026. Risks to the outlook remain, particularly related to inadequate debt restructuring, reversal of reforms, financial sector vulnerabilities, and the enduring impact of the crisis. The report emphasizes that strong reform implementation will be fundamental to fostering a resilient economy through continued macro-fiscal-financial stability, greater private sector investment, and addressing risks associated with state-owned enterprises.

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Comments - 22

Grace Tuesday, 02 April 2024 04:34 PM

This is a case of operation success but patient died.

Actual Situation Looks Bleak Wednesday, 03 April 2024 06:30 AM

Absolutely. The actual picture is not being told and the people are being deceived. There is a documentary on a Singapore news channel (CNA) title Debt Bomb / The Real Debt Trap about SL in a very challenging situation. Prominent Sri Lankan’s are interviewed and a detailed explanation is given on the whole scenario of the amount of debts. Google it up. A smoke screen is being created just for the coming Elections but actual situation looks bleak for the coming years!

Mizaru Tuesday, 02 April 2024 04:36 PM

So what they imply is the operation is successful, the patient dead. They are taking bananas.

johan Tuesday, 02 April 2024 05:03 PM

Poverty cannot be elevated unless people change the govt.Because Govt. has no financial discipline at all.

Dee Tuesday, 02 April 2024 10:17 PM

On the flip side - people need to change! This same set of people demanding the same freebies, whatever government that’ll get elected- country will remain ‘third world’- period! Sadly, Sri Lankans think they are educated! We are not. Not at all! That’s why we remain’3rd world’

Sam Silva Wednesday, 03 April 2024 02:10 AM

@Dee Very true. To a certain point we all created this crisis along with the corrupted governments over the years. No government could undo . If we are lucky it will take generations to come.

Rip Winkle Tuesday, 02 April 2024 05:26 PM

And despite this our attention and admiration seeking dolt gifts a million dollars to another nation.

Rex Jarkie Wednesday, 03 April 2024 11:56 AM

the children are straving in the Island without propER FOOD TO HAVE THRE SQUARE MEALS BUT WE DONATIONING FOR WHOSE BENEFIT NO NO MONEY IS THE CRY BUT HAVE MONEY TO DONATE TO OTHERS FIRST LOOK AFTER THE FAMILY WITHOUT SHOWING OF TO THE WORLD

Sambo Tuesday, 02 April 2024 07:31 PM

The economy of the politicians have stabilized but not the poor people.

Still in a Very Challenging Situation Tuesday, 02 April 2024 09:30 PM

Can’t understand how this is possible when there is a huge budget deficit. Debts are still being owed to international creditors plus its interest will need to be paid from next year onwards. Current govt expenditures on high salaries, huge Tri Forces and other expenses are way too high in comparison to the revenue collection. The actual picture is not being told and the people are being deceived. There is a documentary on a Singapore news channel (CNA) title Debt Bomb / The Real Debt Trap about SL in a challenging situation. Prominent Sri Lankan’s are interviewed and a detailed explanation given on the whole scenario of the amount of outstanding debts. A smoke screen is being created just for the coming Elections but actual situation doesn’t look rosy!

Rishan Tuesday, 02 April 2024 11:59 PM

Poverty means no enough money to buy basic needs , food, clothes, medicine, education....why ..... all of the prices have gone by 200-300% while the salary is the same as 2018/2019 salary. Now see who will receive the bonus for the New Year??? Banks,..... why people pawn there jewellery, obtained loans , credit cards usage have gone up, leasing....

Jude Wednesday, 03 April 2024 01:29 AM

SL economy should have a Mix of Socialism!!!!

Jude Wednesday, 03 April 2024 01:33 AM

ONLY way to improve SL economy, for starters have only 100 MP's and 18 cabinet ministers. Scrap the PC's and local government councils yeah thereafter SL never have to borrow money, period.

Jude Wednesday, 03 April 2024 02:03 AM

Tell me exactly which part is stabilizing!???

Jude Wednesday, 03 April 2024 02:55 AM

Come This October there going to be change of government and the NPP gonna govern this country thereafter give 3 years and you'll see the turnaround. The biggest change gonna be NO government corruption and that itself will save scores of billion rupees! Yeah.

Bandu Wednesday, 03 April 2024 04:13 AM

Implies , very slow recovery. Don't expect much economic improvement.

Michael obeyesekere Wednesday, 03 April 2024 06:39 AM

The Word Bank and I.M.F was created by Colonial western power to keep developing countries UNDER DEVELOPED. Taking advantage of their situations to buy resources for less than market value,this common practice in Africa and South America, however the people of Africa and south America are fighting back for better Prices for resources and commodities. Sri Lanka must not sell its Colombo and Trincomalee ports as India has no deep water ports and they will monopolise if given a chance.Sri Lank Telecom also must be kept in Government and developed into I.T hub. However the public service must be cut by 50% as this is a drag on Sri Lankas economy.

Leena Munas Wednesday, 03 April 2024 01:08 PM

The operation was a success, but the patient died.

Alibabas will not easily surrender their greed! Wednesday, 03 April 2024 01:39 PM

This morning I went marketing. Vegetable were very cheap, and 1 kg. cost between Rs.100/- and Rs.200/- There had not been any bumper harvest, so how come price have come down. Vegetables and fruits are perishable, yet the prices were high. This kept the consumers away, while farmers were reluctant to produce. When you analyze, you find that it is the middleman who dictate terms to the nation. Is it at the instigation of Alibaba and the clan? We don't know! But they are quite capable.

Jabilo Thursday, 04 April 2024 07:44 AM

Ranil aIya knows the law and arithmetic.

Ron Thursday, 04 April 2024 10:41 AM

Its call 23 millon feeding the 225 go you good thing ....225 should be multiply for beter results

Tulus Fernando Saturday, 06 April 2024 02:58 PM

The local economist is liken to a beggar who borrows from a rich man takes it and squanders part of it other he places it in a bank -he goes again

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Sri Lanka’s economy shows signs of stabilization, but poverty remains elevated

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