Central Bank of Sri Lanka says annual economic growth expected to turn positive in 2024

Sri Lanka’s economy is expected to keep growing in 2024 and gradually reach its potential over the medium term, according to the Central Bank’s latest report on monetary policy.

The report, released on Thursday (February 15), gives insights into what’s expected for the economy, especially in terms of inflation and economic growth.

It also looks at the risks that could affect these projections, considering both domestic and global factors.

In 2023, Sri Lanka managed to bring down its inflation rate to single digits, restoring stability to prices after the record-high inflation seen in 2022.

The Central Bank notes that inflation is expected to stabilize around 5% over the medium term.

While there might be some fluctuations in inflation in the short term, particularly due to recent changes in the Value-Added Tax (VAT) and disruptions in the supply chain, the Central Bank believes these effects will be temporary.

At the beginning of 2024, the government raised the VAT from 15% to 18% to meet revenue targets outlined in the International Monetary Fund (IMF) program.

Sri Lanka is starting to recover economically, partly owing to the $2.9 billion bailout package from the IMF.

This aid came after the country faced its worst financial crisis since gaining independence in 1948, including its first-ever default on foreign debt in April 2022.

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