Sri Lanka economy could shrink by -3.5pc to -4pc in 2023

COLOMBO: Sri Lanka's economy could contract by -3.5 or -4.0 percent in 2023 after shrinking -11 percent last year, President Ranil Wickremesinghe said on Saturday.

"From 2024, we will take this economy to positive growth. We are creating a strong country that does not bow down to anyone and is debt-free," he said.

Speaking at an event, he said: "The growth rate of the economy in 2022 was -11 percent and could be -3.5 or -4.0 percent this year."

If economic programs which includes difficult changes in policy such as higher taxes, cuts in public expenditure and debt restructuring were not implemented then Sri Lanka could witness further political unrest, he said.

"No one can prevent the country from falling into crisis again similar to May and June last year," Wickremesinghe said.

The island nation of 22 million people has struggled with challenges during the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession - the worst such crisis since independence from Britain in 1948.

The government signed a preliminary agreement with the International Monetary Fund (IMF) in September for a $2.9 billion program but has to put its debt on a sustainable path before disbursements can begin.

Sri Lanka expects to get China's backing for its debt restructuring plan within days to help unlock a $2.9 billion loan from the International Monetary Fund, a government official said on Friday, as India pledged further support to its crisis-stricken southern neighbour.

India has already told the IMF it strongly supports Sri Lanka's debt restructuring plan and China, the island's largest bilateral lender, is the last major creditor that has yet to agree to the deal.

Sri Lanka owes about $1 billion to India that will come under the purview of the debt restructuring deal. New Delhi has provided the island nation another $4 billion in rapid assistance since early last year.

Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative show.

The country signed a preliminary agreement for a $2.9 billion bailout package with the International Monetary Fund last September but has to put its debt on track before disbursements can begin.