By: Staff Writer
March 19, Colombo (LNW): Sri Lanka’s economy will rebound in 2024, following two consecutive years of contraction, although the economy will continue to grow owing to a severely damaged policy infrastructure hampering the revival of its textiles industry, Economists Intelligence Unit reported.
Higher electricity prices, following IMF conditions, will continue to pinch both consumers and manufacturers.
Although Sri Lanka has been able to get “in-principal” approval for debt restructuring from all its bilateral creditors, including India and China, actual debt restructuring may last the whole of 2024.
As a result, the country will remain in default in 2024, with external debt service suspended until a credible debt-restructuring plan is agreed upon with its bilateral creditors, it added.
With both presidential and parliamentary elections stated to take place in 2024, political instability will persist owing to potential collusion between the incumbent, Ranil Wickremesinghe, and a major political party, Sri Lanka Podujana Peramuna (SLPP, Sri Lanka People’s Front), to delay presidential elections in the light of their waning popularity.
Delays in implementation of the IMF reforms will weigh on the economic recovery, amid strong opposition. However, a strong recovery in tourism receipts will help the recovery in the medium term. A lack of structural reform will hold back economic growth, yje report revealed..
As the country addresses some of the main causes of the crisis the recovery remains fragile. Tight borrowing conditions and reduced disposable income hold back consumption, IMF recent statement said.
More time and continued reform efforts are needed for people to feel the benefits of these initial green shoots because of how deeply the crisis affected the living standards. When uncertainties associated with the external debt restructuring and the stability of the policy framework are resolved, domestic financing conditions should ease, allowing the nascent recovery to become more broad-based.
Everyone will have to pitch in for all to enjoy the fruits of these efforts. Those who are better off will need to contribute more so the government can provide essential services and help those most in need.
Working together is also needed to help eliminate corruption and inefficiency. Corruption, tax exemptions, and non-competitive procurement and allocation practices imply higher taxes and costs for everyone, hitting the most vulnerable hardest.
The ongoing efforts to implement the recommendations of the IMF Governance Diagnostic Report—the first in Asia—will help to reduce these losses for the benefit of everyone. Prevention also requires providing a safe space for public engagement in governance.
There is light at the end of the tunnel. Although it may seem as small as a pinhole at the moment, continued reforms will accelerate passage through the tunnel and allow this light to become bigger and bigger. Maintaining the reform momentum is Sri Lanka’s best hope for recovering from one of its most severe economic crises It added.
