Courtesy CNA

BENGALURU : Sri Lanka’s economy is expected to grow by 3 per cent in 2024 after it reduced interest rates amid easing inflation, its central bank said on Thursday, as the country navigates its escape from its worst financial crisis in decades.

The island nation’s economy contracted 2.3 per cent in 2023 after also shrinking the previous year as the country plunged into its worst financial crisis since independence from Britain in 1948 and following a fall in its foreign exchange reserves to record lows in early 2022.

“The country has not fully exited the crisis, there is no space available for any slippages from the committed path,” the Central Bank of Sri Lanka said in the report.

However, the central bank lowered interest rates in March in a bid to prioritise growth after keeping its policy rates unchanged in January to tame inflation.

The country is also attempting to allay a debt crisis.

The government rejected a proposal by international bondholders to restructure more than $12 billion in debt last week, delaying its efforts, but has pledged to resume negotiations.

Sri Lanka’s central bank said it is paramount that the country stick to its Extended Fund Facility agreement with the International Monetary Fund and complete its debt restructuring process, according to a report it issued on Thursday.