Sri Lanka is gradually recovering from its severe economic crisis
which was exacerbated by the COVID-19 pandemic and significant policy missteps. The crisis, which saw the country declare bankruptcy in 2022, led to severe shortages of essentials such as food, medicine, and fuel, as well as extended power cuts. This economic turmoil prompted widespread protests and resulted in a change of leadership (The Diplomat) (Asian Development Bank).
To address the crisis, Sri Lanka has implemented several economic reforms and secured international assistance. The country reached a debt restructuring agreement with its major creditors, including China, India, and France. This deal, alongside a $3 billion IMF bailout program, is aimed at stabilizing the economy and resuming foreign-funded development projects (The Diplomat) (IMF).
While the economic situation has shown signs of improvement, with inflation moderating and some economic indicators turning positive, challenges remain. The government has increased electricity tariffs and imposed new taxes to boost revenue as part of the IMF's conditions, which has led to public dissatisfaction (The Diplomat) (IMF).
Overall, Sri Lanka's journey to full economic recovery will depend on the continued implementation of reforms and successful management of its debt (Asian Development Bank) (IMF).
