Sri Lanka restored macroeconomic stability via corrective policies : CB report

Sri Lanka’s annual economic growth is to take a positive shift in 2024 and progressively reach its potential over the medium term, the Central Bank's monetary policy report - February 2024 released on Thursday, revealed.

The Sri Lankan economy progressed on the path towards restored macroeconomic stability in 2023 where inflation was brought down from its highest levels in history observed in 2022, to single-digit levels, the bank announced.

This was possible due to corrective policies and structural reforms adopted by the monetary authority while economic activity gradually regained momentum in 2023.

Monetary policy was relaxed on several occasions since June 2023 as inflation decelerated and inflation expectations remained anchored, while external sector pressures eased.

Inflation may deviate from the target in the near term mainly due to the recent tax amendments and supply side disruptions, although such impact is likely to be short-lived.

Inflation is projected to stabilise around the targeted level of 5 per cent (year-on-year) over the medium term.

It may deviate from the target in the near term mainly due to the recent tax amendments and supply side disruptions, although such impact is likely to be short-lived, the report predicted

Sri Lanka is currently overcoming the set back from an economic crisis amid risks on exports from global slowdown and any deviation from  International Monetary Fund supported economic reform  programme could create high economic risks, it said.

“A major factor that influences the economic outlook is the continuation of the IMF – Extended Fund Facility (EFF) arrangement and the progression of the envisaged structural reforms,” the report highlighted.

“Any disruption to this programme would create high economic costs to the country due to growth derailment, loss of confidence, and the protraction of negative investor sentiments,” it said.