The economic progression witnessed in the latter half of last year is expected to continue in the years ahead, supported by the continuation of the reform agenda under the International Monetary Fund’s Extended Fund Facility (IMF-EFF) arrangement, the Central Bank stated in its inaugural Annual Economic Review for 2023.
“While a broad based economic expansion is envisaged across all sectors, domestic price stability is expected to be preserved with greater independence and accountability of the Central Bank in monetary policymaking and the prohibition of monetary financing of the government budget deficit.
The external sector is anticipated to retain its stability, supported by augmenting external buffers, normalisation of foreign inflows and completion of the restructuring of the foreign debt portfolio of the Government. Reinforced by the legislative amendments and greater consolidation, the financial sector is expected to remain resilient.
While continuing the implementation of much needed institutional and policy reforms aimed at enhancing productivity and efficiency, the Government is expected to strive with its fiscal consolidation efforts to ensure the transition of the economy towards a sustainable path.
However, the CBSL cautioned that the formidable recovery of the Sri Lankan economy hinges on the continuity of the reforms implemented thus far, and as part of this process, the successful continuation of the IMF-EFF arrangement and completion of the debt restructuring process remain paramount.
“With risks abound, the unwavering commitment of policymakers along with wider public acceptance remains imperative to continue with the economic reform agenda and efforts to regain debt sustainability.”
Since the country has not fully exited the crisis, there is no space available for any slippages from the committed path. Recent experiences proved the devastating socioeconomic costs of uncharted policy experiments. Backtracking from the implemented and planned critical reforms will tip the economy to a state of instability.
Thus, continuing with the broader political and social consensus on economic reforms will be critical to avoid recurring policy reversals and resultant economic downturns, to ensure uplifting the welfare of the public through sustained growth.
The report also recalled that the economy witnessed a gradual revival in 2023 from the deepest economic downturn in its post-Independence history.
Decisive policy adjustments and structural reforms implemented by the Government and the Central Bank helped restore macroeconomic stability to a great extent, despite the short run hardships faced by economic stakeholders. These measures were essential to prevent further deepening of the crisis and to navigate the economy along a sustainable path of recovery.
