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Sri Lankan Economy on the Road to Recovery: Focus on Competitiveness and Debt Sustainability

Overview

Colombo, Sri Lanka - The Sri Lankan economy, impacted significantly by the COVID-19 pandemic, is on the road to recovery, according to the latest World Bank Sri Lanka Development Update: Economic and Poverty Impact of COVID-19. The following article outlines the key findings and recommendations from the report.

Economic Recovery and Challenges

  • The Sri Lankan economy, having contracted by 3.6% in 2020, is projected to rebound with a 3.6% growth rate in 2021 (World Bank)
  • Recovery comes despite the heavy toll on the economy and population from the pandemic and control measures

Crucial Elements for a Robust and Lasting Economic Recovery

Competitiveness

  • Addressing competitiveness issues is essential to attract investment and boost exports
  • Improving business environment through tax reforms, trade liberalization, and streamlining regulatory procedures

Debt Sustainability

  • Ensuring debt sustainability becomes crucial with the government’s debt currently standing at 95.9% of the GDP
  • Macroeconomic stability at risk

World Bank’s Support

  • The World Bank has allocated over $1.4 billion in grants, credits, and guarantees to help Sri Lanka weather the COVID-19 challenges
  • Ongoing projects include support for health, education, and climate change initiatives

Quote from the World Bank Country Director

“Sri Lanka’s economy is making progress towards recovery,” stated World Bank Country Director for Sri Lanka and the Maldives, Faris Hadad-Zervos. “However, addressing competitiveness challenges, supporting vulnerable populations, and ensuring debt sustainability will be crucial for a robust and lasting economic recovery.”

Government’s Initiatives

  • Sri Lanka’s government has outlined plans to improve the business environment
  • Plans include tax reforms, trade liberalization, and streamlining regulatory procedures

Future Steps

  • Fostering a conducive business environment
  • Addressing public debt sustainability
  • Re-energizing efforts to reduce poverty

By focusing on these key elements, the Sri Lankan economy can ensure a robust and sustainable recovery from the challenges posed by the COVID-19 pandemic.