The BGA Sri Lanka Team led by BGA Senior Advisor Chullante Jayasuriya, wrote an update to clients on the the country’s outlook for 2024.

Context

  • Sri Lanka’s 2024 outlook is cautiously optimistic, marked by a robust decline in inflation and a significant boost in foreign reserves.
  • Colombo’s recent fiscal measures, including a vital International Monetary Fund (IMF) bailout, signal a commitment to economic reform, despite the strain of new tax legislation on its citizens.

Significance

  • Despite economic challenges, the country experienced positive developments. Inflation dropped from 70 percent in September 2022 to 4 percent in December 2023. Foreign reserves saw a remarkable recovery, from a low of US$20 million in April 2022 to an impressive US$3.6 billion by November 2023. Sri Lanka also successfully secured the second installment of an IMF bailout package worth $337 million, in lieu of its efforts to raise revenue, rebuild reserves and curb inflation. However, the introduction of stringent tax policies is adding significant financial pressure on its citizens, which is expected to intensify in the coming months
  • In a landmark judgment, the Supreme Court of Sri Lanka recently held several former leaders, including former president Gotabaya Rajapaksa, responsible for the economic crisis of 2019–2022. While the ruling imposed no penalties, it carries reputational risks for implicated officials in the upcoming election.

Implications

  • Following the indefinite postponement of the 2022 local elections, President Ranil Wickremasinghe has promised to hold presidential elections in 2024, along with local and parliamentary elections. Constitutional reforms are expected to follow, making these elections especially significant. The new Anticorruption Act, mandating asset declarations by electoral candidates, and the Regulation of Election Expenditure Act are expected to influence the electoral campaigns.
  • Sri Lanka’s ambitious 2024 budget aims to lay the groundwork for economic recovery, but implementation of higher taxes accompanied by delays in the Aswesuma social safety-net program has sparked social unrest. The government’s response to public dissent, including arrests and the use of force, has raised concerns. The impending Antiterrorism Bill and Online Safety Bill, set to replace existing legislation, could further curtail freedom of expression.

BGA will continue to keep you updated on developments in Sri Lanka as they occur. If you have any questions or comments, please contact BGA Senior Advisor Chullante Jayasuriya at cjayasuriya@bowergroupasia.com.

A small ginko leaf

Senior Advisor

Chullanté‘s command of economic, political and social trends in Sri Lanka makes him a unique leader with a broad and deep network throughout the country. He has over 30 years of experience in trade and investment promotion, private sector development, policy planning implementation, management of chambers of commerce and international development cooperation. Chullanté previously served as the International Trade Centre’s national consultant to the National Export Strategy of Sri Lanka and as Sri Lanka senior technical advisor for local economic governance at The Asia Foundation. He is a United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) ... Read More