Sri Lankan economy bounces back, records 4.5% growth in fourth quarter of 2023

After six successive quarters of negative growth, Sri Lanka's bankrupt economy is estimated to have recorded a growth of 4.5 per cent year-on-year in the fourth quarter of 2023, the Central Bank announced on Tuesday. It was only during the third quarter of 2023 that the economy recorded positive growth after six successive quarters of negative growth experienced by the cash-strapped economy.

The headline inflation, as measured by the year-on-year change in the Colombo Consumer Price Index, had decelerated to 5.9 per cent in February from 6.4 per cent in January. The gross official reserves improved to USD 4.5 billion by the end of February 2024, which includes the swap facility from the People’s Bank of China.

Governor Nandalal Weerasinghe said the reserve buildup was better than the Central Bank’s expectations. “The reserve buildup was supported by considerable net purchases by the Central Bank from the domestic foreign exchange market amidst increased foreign currency inflows compared to outflows,” Weerasinghe said.

“The Sri Lankan rupee, which appreciated by 12.1 per cent against the US dollar in 2023, continued to show an appreciation of 6.7 per cent thus far in 2024,” he said. Weerasinghe said the agreements on debt restructuring with sovereign bond-holders could be completed by June in time for the next review of the IMF bailout programme.

Weerasinghe said despite the sovereign default, the commercial loans granted by India along with currency swaps with the Reserve Bank of India continue to be serviced. When the economic crisis kicked in early 2022, India’s extension of 4 billion USD worth of assistance provided a lifeline to Sri Lanka to import fuel and essentials.