• Wednesday, May 29, 2024

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Policy changes post-elections can deter the economic recovery: Central bank chief

Wickremesinghe’s party has indicated that he will seek a fresh term at the elections due in September or October. (Representative Image: iStock)

By: Vibhuti Pathak

The impending presidential elections later this year could impede Sri Lanka’s tentative recovery from its severe economic crisis, cautioned the nation’s central bank chief on Tuesday (7).

Following months of shortages in essential goods like food, fuel, and medicine, Sri Lanka defaulted on its foreign debt in 2022, sparking widespread protests that led to the removal of then-president Gotabaya Rajapaksa.

Under his successor, Ranil Wickremesinghe, austerity measures have been implemented, including significant tax increases, alongside a firm crackdown on anti-government protests.

Nandalal Weerasinghe noted that while the crisis-stricken economy has stabilised to some extent due to stringent reforms prompted by an International Monetary Fund bailout, the country still faces challenges ahead.

“Domestically, what I see as the challenge is to continue the same policies going forward irrespective of the administration,” Weerasinghe said. “That is an important one.”

Wickremesinghe’s party has indicated that he will seek a fresh term at the elections due in September or October.

His two main rivals have said they want to renegotiate the terms of the IMF bailout, reduce taxes and increase food and energy subsidies.

Last month, the Asian Development Bank also warned that Sri Lanka’s recovery could be stalled by abrupt policy changes after elections if the outcome weakened the government’s commitment to austerity measures.

Foreign lenders have also warned that any delay in restructuring Sri Lanka’s foreign debt could impact the economy.

Sri Lanka had expected a deal with foreign lenders — including China, its single biggest bilateral creditor — by the end of March, but so far no accord has been announced.

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