Lanka’s Economy Likely To Rebound This Year


The central bank said the headline inflation is expected to moderate further over the next few months….reports Asian Lite News

Sri Lanka’s domestic economic activity is expected to recover in the second half of this year, Central Bank of Sri Lanka said in a statement on Thursday.

As per the central bank, in the overall context, leading indicators of economic activity point to a lower contraction in gross domestic product (GDP) in the second quarter of this year, compared to the previous projections, while the second half is expected to record a positive growth, compared to the same period of last year, Xinhua news agency reported.

The recovery would be supported by normalisation of monetary conditions, improvement in business confidence, enhancement in supply conditions, relaxation of import restrictions, and the impact of growth-promoting structural reforms.

“However, the impact of weather related disruptions and modest external demand conditions could weigh on expected growth in the near term,” the statement said.

The central bank said the headline inflation is expected to moderate further over the next few months.

“The trade deficit decreased notably during the seven months ending July 2023 with a significant decrease in merchandise imports, despite the decrease in merchandise exports,” it said.

Earnings from tourism and workers’ remittances, which increased considerably in the January-July period, are expected to rise further, it added.

Meanwhile, with multiple deadlines’ extensions given by Bangladesh, Sri Lanka has started repaying currency swap taken from Bangladesh with the first installment of $50 million.

Sri Lanka’s State Finance Minister Shehan Samasinghe announced that the repayment of the loan has been started and on the plans on the upcoming installments of $100 million and final installment of $50 million.

Having undergone a severe financial crisis in 2021, Sri Lanka had borrowed $200 million from the Central Bank of Bangladesh under a currency swap deal. 

Though the repayment was promised within three months, aggravated economic crisis in Sri Lanka turned to a political upheaval with the sitting government was forced to abandon and the President to flee the country. Thus, Sri Lanka sought several extensions for the repayment. 

The original repayment had been promised between August and November 2022 but Sri Lanka had asked for extra deadlines. However, Sri Lanka has been paying the interest every three months.

Bangladeshi media reported quoting Bangladesh Bank Executive Director and spokesperson Mezbaul Haque that of the $200 million loan given to Sri Lanka, an installment of $50 million had been settled. 

“Another installment is due later this month. We expect them to repay the loan in full within this year,” the spokesman had said.

Slowly recovering the worst-ever financial crisis since the independence in 1948, Sri Lanka sees overseas remittances are surging and coming out of the dollar crunch specially with the catching up of tourism, one of the main foreign income generators of the Indian Ocean island nation.

Meanwhile on Monday, Sri Lanka’s Department of Census and Statistics announced that the overall rate of inflation has dropped by almost 50 per cent to 4.6 per cent in July 2023 compared to the previous June which recorded 10.8 per cent. The inflation had dropped to a single digit after 21 months.

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