Sri Lanka polls could pose risk to economic recovery, warns CBSL chief

This is as per media reports, which added Sri Lanka endured prolonged scarcity of food, fuel, and medicines, culminating in a 2022 default on foreign debt amidst widespread protests, leading to the ousting of then-president Gotabaya Rajapaksa.

His successor, Ranil Wickremesinghe, implemented austerity measures, substantial tax hikes, and adopted a firm stance against anti-government demonstrations.

Nandalal Weerasinghe, the governor of the Central Bank of Sri Lanka (CBSL) acknowledged that the economy, grappling with crisis, had stabilised to some extent due to stringent reforms under an International Monetary Fund (IMF) rescue package. However, he stressed that challenges persist, emphasising the importance of continuity in policies regardless of the administration.

Meanwhile, Ranil Wickremesinghe’s party reportedly signalled his intent to seek re-election in the polls slated for September or October even as his main contenders advocated for renegotiating IMF bailout terms, tax reductions, and augmenting subsidies for food and energy.

The Asian Development Bank (ADB), last month, echoed concerns about potential disruption to Sri Lanka’s economic recovery from abrupt policy shifts post-elections, particularly if government’s commitment to austerity measures is weakened.

Foreign lenders, including China, the country’s largest bilateral creditor, cautioned that any delay in restructuring Sri Lanka’s foreign debt could detrimentally affect the economy.

The warnings underscore the delicate balancing act Sri Lanka must navigate to sustain its economic recovery amidst political transitions and external pressures even as continuity in economic policies and timely debt restructuring emerge as pivotal factors in safeguarding the nation’s financial stability and fostering sustained growth.

Fibre2Fashion News Desk (DR)