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World Bank releases 2nd tranche of $250 million to aid economic reforms in Sri Lanka

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World Bank releases 2nd tranche of $250 million to aid economic reforms in Sri Lanka

Sri Lanka, home to around 22 million people, has seen more than a year of acute shortages of essentials along with hyper-inflation, and in April defaulted on its $46 billion external debt.

FP Staff December 20, 2023 19:48:00 IST World Bank releases 2nd tranche of $250 million to aid economic reforms in Sri Lanka

FILE – A vender waits for customers at a vegetable market place in Colombo, Sri Lanka. AP

The World Bank announced on Wednesday that it has released a second tranche of $250 million to support ongoing economic reforms in Sri Lanka.

This follows the International Monetary Fund’s approval earlier this month of the first review of Sri Lanka’s $2.9 billion bailout, providing approximately $337 million in funds to address the repercussions of the country’s most severe financial crisis in decades.

With a population of around 22 million people, Sri Lanka has grappled with acute shortages of essentials and hyper-inflation for over a year. In April, the country defaulted on its $46 billion external debt.

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However, last week Sri Lanka’s bankrupt economy has recorded a positive growth for the first time since the onset of the economic crisis in the island nation. According to the Department of Census and Statistics (DCS), the year-on-year GDP growth rate for the third quarter has been reported as a positive 1.6 percent.

Sri Lanka had previously experienced a negative growth rate of minus 8 percent when it declared bankruptcy in April 2022, and the economic downturn persisted from the fourth quarter of 2021.

Despite the recent positive development, the International Monetary Fund (IMF), which released the second tranche of its USD 2.9 billion bailout earlier this week, maintains that Sri Lanka’s overall growth for 2023 will remain negative. However, the IMF anticipates a positive growth rate for the country’s economy in 2024.

Sri Lanka, which defaulted on its sovereign debt, is still in negotiations with external creditors for concessions on repayment to achieve sustainability, a key component of the IMF bailout.

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