Sri Lanka’s project growth outlook of 4.4% for 2024, remarkable – WBG
Sri Lanka has been through a very tough time during the past few years yet the country has shown remarkable resilience and come back faster and sooner than expectation. The World Bank Group (WBG) Development Update published in October this year highlighted Sri Lanka’s recent economic stabilisation and the project growth outlook is 4.4% which is quite remarkable for this year, opined Gevorg Sargsyan, WBG, Joint Country Representative for Sri Lanka at the inauguration of the Annual International Conference of the Sri Lanka Economic Association held recently in Colombo.
The WBG attributes this to the promising rebound and growth in the industrial and tourism sector boosted by critical structure and policy reforms. He however cautioned that the country is not out of the woods yet. “Sri Lanka has a long track record in starting in the right policy direction only to weir in track later. For the country to prosper this needs to change and it is critical that public policy continues to maintain stability against emerging risks while transforming the economy towards faster sustainable and more inclusive growth. One key risk to stabilize Sri Lanka’s outlook is the large debt burden,” he said.
Sargsyan however cautioned that even with successful debt restructuring Sri Lanka’s public debt level remained high for the foreseeable future. With interest obligations likely to consume as much as half of government revenues in the medium term and upon completion of the IMF program in a few years when suspended payments recommence significant refinancing pressures will emerge too. He was however optimistic that stronger economic growth will help to reduce the burden of these large debt stocks.
“Moreover stronger economic growth will help increase the revenue base. This will open up fiscal space for larger and better investments in key drivers of economic development including education and infrastructure and help realise many other important commitments that the current government has mentioned in its manifesto.”
He however highlighted the need to ensure policy consistency and the continuity of reforms.
“This means ongoing fiscal discipline, improved governance and oversight of state owned bonds and enterprises, independent and credible monitoring policy and exchange flexibility, industrial
transformation and economic revival are required for a stable and well managed economy. SOEs have also been a part of the problem. Reforming SOEs is even more critical if divestment is an immediate priority of the government. We need better governed accountable and commercially managed SOEs to reduce burden on public finance and provide better and cheaper services to public and businesses and enhance investment regime in promoting private sector investment because Sri Lanka does not have much fiscal space for growth in public investment,” he added.
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