Sri Lanka’s development to shrink by 3% in 2023, rebound in 2024: Moody’s

COLOMBO: Sri Lanka’s development is predicted to shrink by 3% this 12 months, Moody’s Traders Service mentioned on Monday because the nation navigates its worst monetary disaster in additional than seven a long time.

Sri Lanka’s monetary crunch was brought on by a extreme drop in its overseas change reserves, which left the island nation struggling to pay for important imports and compelled it into foreign-debt default.

Squeezed by hovering inflation, foreign money depreciation and excessive rates of interest, Sri Lanka’s development is projected to have contracted 8% final 12 months, Moody’s mentioned in an announcement issued on March 10 however launched to media on Monday.

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Nonetheless, development is predicted to rebound in 2024.

Sri Lanka is prone to launch its fourth-quarter and full-year development numbers later this week, its statistics division mentioned.

The nation’s efforts to safe a $2.9-billion bailout by the Worldwide Financial Fund (IMF), which is prone to be permitted on March 20, is a “credit score constructive”, Moody’s mentioned.

“Progress in the direction of securing the EFF (Prolonged Fund Facility) programme is credit score constructive as a result of it unlocks exterior financing that may permit the economic system to import the important items together with meals, gas and uncooked supplies which might be wanted to maintain a restoration and alleviate social challenges,” the assertion mentioned.

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However the beleaguered nation nonetheless must renegotiate its debt, which might doubtlessly be a drawn-out course of, given its various set of collectors.

“Protracted negotiation might danger entry to exterior financing and doubtlessly greater losses for personal collectors,” Moody’s added.

Sri Lanka goals to announce a debt-restructuring technique in April and step up talks with business collectors forward of an IMF overview of a bailout package deal in six months, its central financial institution governor informed Reuters final Thursday.