Sri Lanka Crisis: Imf Forecasts Economic Recovery In 2024 - Review Team Visits Until May 23 | Wion

The International Monetary Fund (IMF) has projected that Sri Lanka's economy, which faced its worst economic crisis since Independence, will begin bouncing back in 2024. The country experienced a three percent contraction this year, resulting in severe shortages of essentials such as medicine, fuel, cooking gas, and food. These shortages led to hungry protests that eventually forced President Kotobara Rajapaksa to flee the country and resign.

As part of regular consultations with Sri Lankan officials, an IMF team is currently visiting the country until May 23rd. They will evaluate the progress made on economic reforms and governance improvements. Six key areas, including Central Bank governance, financial sector oversight, and market regulations, will be assessed for weaknesses. The success of these reforms will influence the country's growth forecast of 1.5 percent for next year.

The Importance of Continuing Reform Momentum

Krishna Srinivasan, the IMF's Director for Asia and Pacific, emphasized the need to maintain the reform momentum. He stated that it is crucial for the authorities and the Sri Lankan people to take strong ownership of these reforms. The commendable progress made by Sri Lanka in implementing challenging policy actions in these areas should be continued.

Furthermore, the economic impact of these reforms on the poor and vulnerable should be mitigated with appropriate measures. It is essential to ensure that the benefits of the reforms reach all segments of society and do not exacerbate inequalities.

IMF's Role in Supporting Sri Lanka

When Sri Lanka's forex reserves plummeted and the country defaulted on foreign debt, the IMF stepped in to provide financial assistance. They approved nearly $3 billion in bailout funds to help the island nation navigate through its economic crisis.

The IMF's financing acts as a cushion during this transition period, providing some breathing space for the necessary reforms to take place. By supporting the country during its most challenging times, the IMF helps the population emerge from the crisis in the medium term.

Recommendations for Improved Governance and Stability

The IMF's report, expected to be completed by September, will lay down recommendations to enhance governance and reduce corruption in Sri Lanka. These recommendations will guide the authorities in ensuring a more stable and transparent economic environment.

One of the key aspects that the IMF suggests is bringing down high domestic interest rates. By doing so, Sri Lanka can restore stability in its economy and encourage investment, both domestic and foreign. This will contribute to long-term growth and prosperity.

Conclusion

Sri Lanka's economic crisis has been severe, causing significant discomfort and hardship for its people. However, with the support of the IMF and the implementation of necessary reforms, there is hope for a recovery. The IMF's projections of a bouncing back economy in 2024 provide some optimism for the future.

It is essential for Sri Lanka's authorities and its people to maintain the reform momentum and take ownership of the necessary changes. By doing so, they can ensure that the benefits of these reforms reach all segments of society, mitigating the impact on the poor and vulnerable.

The IMF's role in providing financial assistance and guidance during this crisis is crucial. Their support acts as a cushion, enabling Sri Lanka to navigate through these challenging times and emerge stronger.

As the report is completed and recommendations for improved governance and stability are presented, it is important for Sri Lanka to consider and implement these suggestions. By doing so, the country can take significant steps towards a more transparent and prosperous future.

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