COLOMBO: Crisis-hit Sri Lanka’s economy shrank by 11.5 per cent in the first quarter just before an IMF bailout kicked in, official figures showed on Thursday.

The contraction in the first three months compared with shrinkage of 0.5pc in the corresponding period of 2022, and a decline of 12.4pc in last year’s final quarter. A currency crisis from late 2021 led to severe shortages of food, fuel and medicines and triggered months of protests that led to the toppling of former president Gotabaya Rajapaksa 11 months ago.

Sri Lanka defaulted on its $46bn external debt in April last year, and is still negotiating with its bilateral and private creditors on repayments. Thursday’s figures confirmed that economic challenges persist.

“Industry and services activities declined by 23.4pc and 5.0pc respectively in the first quarter of 2023,” the statistics office said in a statement.

It said only the agricultural sector had shown growth, but that was a modest 0.8pc, and followed the lifting of a ban on agrochemicals and easier access to fertiliser than late last year.

The International Monetary Fund released the first $330m of a $2.9bn bailout in late March.

It forecasts Sri Lanka’s economy will contract by 3.1pc this year. The World Bank is more pessimistic, predicting a 4.2pc contraction.

Published in Dawn, June 16th, 2023