Sri Lanka’s beleaguered economy, grappling with bankruptcy and negative growth, has registered a positive year-on-year GDP growth rate of 1.6% for the third quarter, marking a significant turnaround. 

This positive development comes amid the country’s adherence to a strict International Monetary Fund (IMF)-backed reform regime.

Economic Crisis and Turnaround:

Having declared bankruptcy in April 2022, Sri Lanka faced a severe economic crisis, with a growth rate of -8 %. The recent positive growth of 1.6% in the third quarter marks a notable shift from the previous negative trajectory.

IMF Bailout and Projections:

The International Monetary Fund (IMF) dismissed the second tranche of its $2.9 billion bailout earlier this week, expressing a cautious outlook for Sri Lanka’s overall growth in 2023, which is expected to remain negative. However, the IMF anticipates a positive growth trajectory for the country’s economy in 2024.

Reform Regime and Political Landscape:

Sri Lanka is undergoing a rigorous IMF-based reform regime spearheaded by President Ranil Wickremesinghe, president and finance minister. 

Despite facing criticism from the opposition and acknowledging the challenges faced by the public, Wickremesinghe emphasizes the necessity of reforms.

Upcoming Elections and Sustainability Negotiations:

Reforms and high cost of living are anticipated to be significant factors in Sri Lanka’s election year 2024. 

The country, which defaulted on its sovereign debt, is actively negotiating with external creditors for concessions on repayment to achieve sustainability, a critical component of the ongoing IMF bailout.