COLOMBO: Sri Lanka’s economy is expected to grow again from the end of this year and the government hopes to extricate the country from its economic crisis by 2026, President Ranil Wickremesinghe told parliament on Wednesday.
The Indian Ocean Island of 22 million people has been struggling with its worst economic turmoil since its independence from Britain in 1948, which has forced it to default on loans and seek a $2.9 billion bailout from the International Monetary Fund (IMF).
“We are now moving from a negative economy towards a positive one. By the end of 2023, we can achieve economic growth,” President Wickremesinghe said in a special policy statement to parliament.
“We have now been able to increase the foreign reserves which had fallen to zero up to $500 million.”
Sri Lanka’s official reserves reached $2.1 billion at the end of January, which is the highest it has been in about a year, the latest central bank data showed.
The reserves include a $1.5 billion swap from China People’s Bank, which Sri Lanka has been unable to tap as it requires the island to have three months’ worth of reserves.
Sri Lanka is also working with its largest bilateral lender, China, to obtain financing assurances supporting a debt restructuring to finalize an IMF program, Wickremesinghe added.
“We are in direct discussions with China. We have received positive responses from all parties. We are now working towards unifying the approaches of other countries and that of China.”
India and Japan, Sri Lanka’s other key lenders have already expressed support.
Wickremesinghe said the government could turn around the economy if the public tolerated high direct taxes for another six months. He said last month that the economy for the full year could contract by 3.5% or 4.0% after shrinking 11% last year.
“If we continue according to this plan, we can rise out of bankruptcy by 2026. As I have been continuously appealing, if all the parties in this Parliament join the process to build the country, we would be able to extricate from this crisis even earlier.”
Recent increases in income tax have hit salaried workers hard, with trade unions and private sector professionals staging protests.
Wickremesinghe said the aim was to reduce inflation to single digits by the end of the year. Sri Lanka’s key inflation rate, the Colombo Consumer Price Index (LKCCPI=ECI), eased to 54.2% in January from 57.2% in December. (Int’l Monitoring Desk)