Sri Lanka economy expands 5.5% as debt overhaul nears conclusion

SRI Lanka’s economy grew 5.5 per cent last quarter, boosting sentiment as the nation looks to finalise debt restructuring that’s crucial to keep the International Monetary Fund’s aid flowing. 

The expansion compares with a 4.7 per cent growth in the April-June period and comes as authorities said that bondholders backed the dollar bond swap plan. 

Last month, Sri Lanka secured access to US$333 million in financing out of a US$3 billion IMF bailout programme. While the funds will help stabilise the island nation’s economy, they are contingent on further policy actions, including progress in debt restructuring.

President Anura Kumara Dissanayake said on Nov 21 that his newly-elected administration will continue with the IMF loan programme and that ensuring stability was paramount for his government, with the economy too fragile to take big shocks. 

Authorities expect to conclude the restructuring of US$12.6 billion in debt this month, a move that will be a key milestone in Sri Lanka’s efforts to overhaul its economy after the country defaulted in 2022, as it helps restoring access to international markets.

The central bank expects Sri Lanka’s economy to grow between 4.5 per cent and 5 per cent this year and by “well above” 3 per cent in 2025. Governor Nandalal Weerasinghe has also said the monetary authority has strengthened foreign exchange reserves, which would be a buffer to meet debt servicing requirements. BLOOMBERG