COLOMBO: Sri Lanka will focus on stronger recovery this year after the island nation posted real GDP growth of 5% in 2024, the highest in seven years, its central bank chief said on Wednesday, hoping to accelerate a rebound from its worst financial crisis in decades.
Sri Lanka’s economy crumpled under a severe foreign exchange crisis in 2022, but has posted a faster than expected rally after it secured a $2.9 billion International Monetary Fund (IMF) program in March 2023 and completed a $25 billion debt restructuring in December.
The economy grew 5.2% in the first nine months of 2024, outstripping the 3% estimate by the Central Bank of Sri Lanka (CBSL), Governor P. Nandalal Weerasinghe said.
“Achieving a transformative acceleration in growth trajectory is essential to catch up and enhance the growth potential. This would also help enhance the debt-carrying capacity of the country,” he said at a annual policy agenda launch.
Taking advantage of lower inflation, which reached minus 1.7% in December, Sri Lanka’s central bank set a new single policy rate of 8%, easing monetary settings below previously used benchmarks and setting the stage for stronger private sector credit growth, Weerasinghe added.
Inflation is expected to reach positive territory in mid-2025, after which CBSL will focus on maintaining a 5% inflation rate. CBSL will also strengthen monetary policy forecasting, continue to improve its reserve buffers under the IMF program, and introduce a benchmark spot exchange rate in 2025.
Sri Lanka eases monetary policy, sets new single benchmark rate
Weerasinghe said. Sri Lanka will continue recapitalisation of banks, consolidate large finance companies, and review the Statutory Reserve Ratio (SRR) of 2% to increase financial system stability, the Governor added.
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