Colombo, In a positive turn of events, Sri Lanka’s economy experienced growth in the September quarter, marking its first expansion since a foreign exchange shortage led to a debt default last year. The Central Bank of Sri Lanka reported a modest growth of 1.6%, a notable improvement from the 11.5% contraction recorded in the same period a year earlier.
The growth was attributed to positive developments in the transport, services, and agriculture sectors, as outlined in the central bank’s statement. Despite this quarter’s improvement, the cumulative figures for the first nine months of the year indicate an overall contraction of 4.9%. The International Monetary Fund (IMF) remains cautious, forecasting a negative 3.6% full-year GDP growth for Sri Lanka in 2023.
While signs of economic stabilization are evident, the IMF emphasized that Sri Lanka is not yet out of the woods. The island nation faced nine consecutive quarters of economic shrinkage since Q3 2021, culminating in a $46 billion external debt default in April last year.
Last month, Sri Lanka announced reaching an “agreement in principle” with lenders, including China, to restructure nearly $6 billion in bilateral loans—a crucial step for sustaining the ongoing IMF program. The country’s economic challenges led to civil unrest, resulting in the ouster of the former president Gotabaya Rajapaksa, with Ranil Wickremesinghe taking charge and implementing fiscal measures to stabilize state revenue.
