Sri Lankan Economy Bounces Back

Sri Lanka on Monday hailed data showing that the economy grew far more than expected in the first quarter, as the country continued its recovery from a crippling foreign exchange crisis. The 5.3 percent expansion in January-March marked an increase from the previous three months and represented a significant improvement over the 10.7 percent contraction in the same quarter last year. This growth also exceeded forecasts of 4.0 percent in a survey by Bloomberg News. Deputy finance minister Ranjith Siyambalapitiya said the government expected overall annual growth in 2024 to be around 2.2 percent. “It is remarkable that we were able to achieve positive growth two years after facing the worst economic crisis ever,” he said in a statement.

Official figures showed a sharp recovery in the industrial sector, with an 11.8 percent expansion in the first quarter, compared to a 24.3 percent contraction in January-March 2023. The construction sector also showed improvement, as inflation dropped from a peak of 70 percent in September 2022 to 0.9 percent in May.

Last week, the International Monetary Fund released $336 million as part of a four-year $2.9 billion bailout for Sri Lanka, which defaulted on its $46 billion foreign debt in April 2022. The peak of the economic crisis in 2022 saw months of food, fuel, and medicine shortages after the island ran out of foreign exchange to pay for imports. The resulting civil unrest led to the ouster of then-president Gotabaya Rajapaksa, when protesters stormed his residence. His successor, Ranil Wickremesinghe, has doubled taxes, withdrawn generous energy subsidies, and raised prices of essentials to shore up state revenue.