The World Bank announced on Wednesday its disbursement of $250 million to support Sri Lanka’s economic reforms, aiding the country amid its financial crisis.
In 2022, Sri Lanka faced bankruptcy due to defaults on its $46 billion external debt, triggering a severe shortage of foreign exchange for essential imports like food, fuel, and medicines. Civil unrest led to the removal of then-President Gotabaya Rajapaksa.
The succeeding government has been implementing stringent austerity measures to stabilize the situation and restore crucial supplies. The World Bank confirmed the release of the second $250 million tranche from a total aid package of $500 million, acknowledging the government’s satisfactory progress with its reform program.
In line with a $2.9 billion bailout from the International Monetary Fund (IMF), Sri Lanka has enacted measures such as doubling taxes, eliminating fuel and electricity subsidies, and introducing anti-corruption laws.
The IMF recently disbursed the second tranche of $337 million following Sri Lanka’s successful negotiation of a debt restructuring agreement with China, its primary bilateral lender.
Positive signs emerged as the economy showed growth in the September quarter, marking the first expansion since the onset of the foreign exchange crisis.
The Central Bank of Sri Lanka reported a modest 1.6% growth in the economy for the quarter ending in September, a significant improvement from the 11.5% contraction recorded a year earlier.
However, while the recent data is encouraging, the cumulative figures for the first nine months of the year indicate an overall contraction of 4.9%. The IMF’s forecast for Sri Lanka’s full-year GDP growth in 2023 remains pessimistic, projecting a negative growth rate of 3.6%.