Economic Setback Sri Lanka’s Economy Shrinks at Alarming Rate of 11.5%
COLOMBO: Sri Lanka’s crisis-ridden economy contracted by 11.5 percent in the first quarter of the year, just prior to the initiation of an IMF bailout, according to official figures released on Thursday.
This decline in the first three months follows a shrinkage of 0.5 percent during the same period in 2022 and a decline of 12.4 percent in the final quarter of last year. A currency crisis starting in late 2021 resulted in severe shortages of food, fuel, and medicines, leading to months of protests and ultimately the ousting of former president Gotabaya Rajapaksa 11 months ago.
Sri Lanka defaulted on its $46 billion external debt in April of last year and is currently engaged in negotiations with bilateral and private creditors for repayment. Thursday’s figures confirm the persisting economic challenges faced by the country.
“The statistics office stated in a statement that industry and services activities declined by 23.4 percent and 5.0 percent, respectively, in the first quarter of 2023.”
However, the agricultural sector showed modest growth of 0.8 percent, attributed to the lifting of the agrochemical ban and improved access to fertilizers compared to the previous year.
In late March, the International Monetary Fund disbursed the initial $330 million of a $2.9 billion bailout package. The IMF projects a 3.1 percent contraction in Sri Lanka’s economy this year, while the World Bank offers a more pessimistic outlook, predicting a 4.2 percent contraction.
