The World Bank predicts that Sri Lanka’s poverty will increase to 27.9 percent in 2023 from 25 percent in 2022 as the country continues to suffer from the most extreme deployment of ‘macro-economic policy’ in the history of its central bank.
The World Bank in a report titled ‘Sri Lanka Development Update: Mobilizing Tax Revenue for a Brighter Future’ said: “Poverty is projected to increase from 25 percent to 27.9 percent between 2022 and 2023. Poverty reduction could resume from 2024 and continue in 2025, but this depends on continued implementation of structural reforms and a restoration of economic growth and job creation.
“Inflation is expected to stay in single digits, reflecting weak aggregate demand, improving supply conditions, lower global commodity prices, and discontinued monetization of deficits.”
It said that downside risks for the Sri Lankan economy remain very high, given a narrow path to recovery and limited buffers. “A prolonged or insufficiently deep external debt restructuring, a deterioration in the political situation (including a backlash to the reforms), inadequate domestic revenue mobilization, limited external financing support, a sharper global slowdown, and a prolonged recovery from the scarring effects of the crisis are key risks to restoring stability, regaining a sustainable growth path, and bringing Sri Lanka back to pre-crisis rates of poverty. The financial sector needs continuous monitoring, given high exposures to the public sector, rising non-performing assets, and tight liquidity conditions. While the adjustment process may provoke resistance, and backlash from affected groups, it is essential for the country to stay the course on reforms, carefully navigate political and social pressures, and effectively mitigate the impact of the reforms on the most poor and vulnerable,” the report said.
