SL Growth on track, but fiscal discipline, reforms essential – CB Chief
Sri Lanka’s economic growth rate currently is adequate to enable the achievement of International Monetary Fund (IMF) debt sustainability levels but would be contingent on tight fiscal discipline and stable development policies, Central Bank (CB) Governor Nandalal Weerasinghe emphasised.
Addressing the CB’s fourth monetary policy review press conference on Wednesday, he said that the IMF Debt Sustainability Analysis (DSA) requires Sri Lanka to achieve at least an annual growth rate of about 3 per cent so that it can service its long-term debt.
“We are currently walking over that line, but the sustainability of the growth will depend on how the government treats its fiscal strategy and development work,” said the Governor.
The CB’s Monetary Policy Board at its meeting on Tuesday decided to maintain, without any change, the Overnight Policy Rate (OPR) at the current level of 7.75 per cent.
Sri Lanka has recorded 5 per cent economic growth for 2024 and a decrease to 4.8 per cent in the first quarter of 2025, showing the continued momentum in the recovery process from the economic crisis of 2022. However, the CB cautioned that internal and external risks may affect this trajectory of recovery.
The Asian Development Bank (ADB) predicts Sri Lanka’s economy will grow by 3.9 per cent in 2025, having surpassed its own projections by expanding 5 per cent in 2024. It adds the Sri Lankan economy continues to be exposed to external factors, including prospective impacts from US trade policy.
The ADB alerted that while macroeconomic stability is improved, trade-related shocks to the global economy could affect the island nation’s economic recovery unless It fails to take timely action on structural change and diversification of exports.
Dr. Weerasinghe also addressed growing speculations regarding vehicle imports, stating that the CB had not imposed or lifted any prohibitions. Instead, the CB had given guidance to licenced commercial banks on being prudent in foreign exchange when settling Letters of Credit for vehicle imports.
“Our role was limited to reminding banks to take forex availability and economic priority into account while making such transactions,” he added.
He emphasised the need for fiscal and monetary policy coordination to bring about macroeconomic stability. So long as inflation remains within target and private sector credit keeps growing, reform momentum and, improved quality of public investment, investor confidence will be required before sustained advancement is possible.
With the Extended Fund Facility (EFF) of the IMF continuing to adhere to economic reform, the CB reaffirmed its commitment to maintaining price stability and responding to policy if inflation, reserves, or growth prospects deviate from expectations.
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