Preserving Continuity in Reforms Crucial for Sri Lanka to Avert Economic Setbacks, Warns Central Bank Governor

Sri Lanka's economic recovery depends on IMF reforms, says Central Bank Governor Nandalal Weerasinghe. He warns against policy slippages and stresses the need for continued reforms regardless of upcoming presidential elections. The successful conclusion of debt restructuring talks with private bondholders is crucial for the IMF bailout. The Central Bank report highlights downside risks, particularly related to elections and their potential impact on fiscal policy and reform.

The sustainability of Sri Lanka's economic recovery from its 2022 bankruptcy hinges mainly on the reform agenda of the IMF's extended fund facility arrangement, Central Bank Governor Nandalal Weerasinghe said on Tuesday.

He was commenting on the 2023 annual report of the Central Bank that was released today.

"Since the country has not fully exited the crisis, there is no space available for any slippages from the committed path," Weerasinghe said.

Backtracking from the implemented and planned critical reforms will tip the economy to a state of instability, he warned as the island is bracing to face the presidential election in the last quarter of this year.

"Domestically, what I see as the challenge is to continue the same policies going forward irrespective of the administration," Weerasinghe said in a reference to the looming elections.

President Ranil Wickremesinghe has steered the economy since the bankruptcy of 2022 with a string of unpopular reforms.

Weerasinghe said the successful conclusion of the current debt restructuring negotiations involving USD 46 billion was important to stay on course with the International Monetary Fund bailout.

Sri Lanka is still engaged with the private bondholders which the IMF said should end in the signing of MoUs by next month.

The Central Bank report said, "risks to the outlook tend to the downside".

"Among them, the most important is uncertainty associated with the upcoming elections, including any possible impact on fiscal policy and reform implementation."

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