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World Bank predicts shrinking of local economy by 4.3 per cent this year

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Sri Lankan economy is projected to contract by 4.3 percent in 2023 as demand continues to be subdued, job and income losses intensify, and supply-side constraints adversely affect production, the World Bank announced on Tuesday.

Sri Lanka’s heightened fiscal, external, and financial imbalances and its fluid political situation pose significant uncertainty for the country’s economic outlook, said the World Bank in its twice-a-year update, underscoring the need to address the root causes of the country’s economic crisis and build a strong and resilient economy to prevent future crises.

“The economic crisis in Sri Lanka has had deep impacts with over half a million jobs lost and 2.7 million additional people falling into poverty between 2021 and 2022,” said Faris H. Hadad-Zervos, World Bank country director for Maldives, Nepal, and Sri Lanka.

“The prolonged recovery from the scarring effects of this crisis in addition to a slow debt restructuring process, limited external financing support, and an uncertain global environment pose significant risks to the country’s economic growth,” the country director said.

The economy will continue to face significant challenges in 2023 and beyond, and a lower-level external trade equilibrium could have contagion effects on domestic trade, economic activity, jobs and incomes, according to the World Bank.

Strong and effective implementation of the government’s reform program, supported by financing from international partners, could boost confidence and attract fresh capital inflows that are key to improving job prospects and restoring livelihoods, said the World Bank.



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Sri Lanka’s foreign reserves up by USD 2billion over the past year – Acting Finance Minister

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Acting Finance Minister Ranjith Siyambalapitiya during a press conference held today (21) at the Presidential Media Center, focusing on the theme of ‘Collective Path to a Stable Country’ said that over the past year, the government successfully increased the country’s foreign reserves from 1.8 billion dollars to 3.8 billion dollars.

He added that in August 2022, the exchange rate stood at Rs. 361 per dollar, but by August 2023, one dollar could be acquired for Rs. 321. This shift is not the result of artificial control but rather a reflection of the rupee’s value adjusting in response to supply and demand for the dollar, which holds significant economic importance.

The interest rate for deposits, previously at 14% in 2022, has been lowered to 11%, while the loan interest rate, previously at 15.5%, has been reduced to 12% this year. Notably, last year, the primary account deficit was Rs. -247 billion, but this year it has turned into a surplus of Rs. 27 billion. This marks the first surplus in the primary account balance in over 40 years.

Tourist arrivals, which numbered 496,430 in 2022, have surged to 904,318 during the first two quarters of this year. Equally impressive is the growth in tourism earnings, which rose from 832.6 million US dollars in 2022 to 1,304.5 million US dollars in the first two quarters of this year, reflecting a remarkable 56.7% increase compared to the previous year.

In the past year, the amount of money remitted by Sri Lankans living abroad to Sri Lanka has surged from 2,214.8 million US dollars to 3,862.7 million US dollars this year, marking a remarkable 74.4% increase according to data from the Ministry of Finance.

On August 1, 2022, the QR code system was introduced as a measure to manage petroleum demand due to foreign exchange shortages. This led to a significant disparity between normal demand and supply, resulting in a notable increase in diesel consumption by 28% and petrol consumption by 83% in June 2023, when the QR system was partially relaxed. However, as of September 1, the QR code system, which directly impacts economic growth, has been completely lifted.

Upon assuming office, President Ranil Wickremesinghe faced a daunting challenge of addressing a 14-hour power outage, which had a direct impact on the economy. Presently, the government ensures a continuous and stable electricity supply to the population.

As of August 23, 2023, there were 1467 imported goods banned due to foreign exchange shortages. Currently, the ban applies to only 279 items. Furthermore, the import of vehicles, which had been halted in 2020, now includes buses and trucks for public transport.

In April 2022, the country faced difficulties in meeting its debt obligations. However, the government has since secured the first installment under the International Monetary Fund’s Extended Credit Scheme, contributing to stabilizing the country’s economy compared to the previous year.

(PMC)

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President Wickremesinghe meets US President Joe Biden in New York

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President Joe Biden and first lady Jill Biden hosted President Ranil Wickremesinghe and first lady Maithri Wickremesinghe for dinner on Thursday

President Joe Biden of the United States and President Ranil Wickremesinghe engaged in a cordial meeting  in New York on Thursday (20).

The high-profile meeting took place amidst a lavish dinner hosted by President Biden, for all the heads of state who had participated in the 78th session of the United Nations General Assembly.

 

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Ministerial Consultative Committee unanimously consent to canceling the nominations submitted for the Local Government Elections

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The Ministerial Consultative Committee on Public Administration, Home Affairs, Provincial Councils & Local Government chaired by  Prime Minister Dinesh Gunawardena as well as the Minister of Public Administration, Home Affairs, Provincial Councils and Local Government  unanimously consented to cancel the nominations submitted for the Local Government Elections given that those who have submitted nominations have faced great difficulties due to the postponement of the elections.

 

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