Sri Lanka’s Economic Outlook
By Uditha Jayasinghe
COLOMBO (Reuters) – Sri Lanka is projected to achieve a growth rate of 3.5% this year, according to the latest report from the World Bank, which remains consistent with its October forecast. However, the nation faces challenges, including heavy U.S. tariffs and elevated poverty rates.
Last year, Sri Lanka recorded a 5% growth, recovering from a severe financial crisis triggered by a historic dollar shortfall three years ago, aided by a $2.9 billion program from the International Monetary Fund (IMF).
The government is concerned that the 44% tariffs imposed by the U.S. under President Donald Trump could negatively impact around $3 billion of its exports, jeopardizing its economic recovery. It aims to enhance trade relations with the United States.
According to the World Bank, the medium-term growth trajectory for Sri Lanka relies on sustained macroeconomic stability, supporting a flexible exchange rate, necessary reforms for loss-making state enterprises, and increased investment in trade.
Meanwhile, household income, job availability, and general welfare remain significantly lower than pre-crisis figures, with the poverty rate alarmingly high at 24.5% for 2024. Many citizens are seeking employment opportunities abroad.
David Sislen, World Bank division director for the Maldives, Nepal, and Sri Lanka, stated, “While Sri Lanka’s economy is bouncing back stronger than expected, a significant portion of the population—approximately a third—remains impoverished or at risk of reverting to poverty.”
The World Bank anticipates that Sri Lanka’s growth will further decelerate to 3.1% next year, consistent with the October forecast.
Officials from the Sri Lankan central bank and finance ministry are currently in Washington to engage with the International Monetary Fund regarding discussions on the fourth review of their IMF program.
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