Sri Lanka economic growth picks up as IMF aid keeps flowing

Sri Lanka’s economy grew faster than expected last quarter, indicating strong domestic activity backed by the International Monetary Fund’s aid.

Gross domestic product rose 5.4% in the three months to December from a year ago, the Statistics Department said Tuesday, higher than the 5.3% expansion predicted by economists in a Bloomberg survey. GDP figures for July-September period were revised lower to 5.3% from 5.5% earlier.

For the full year, the economy expanded 5%, bouncing from a contraction of 2.3% the previous year.

Sri Lanka has turned the corner after an unprecedented default in 2022, with economic growth forecast to sustain around 5% in 2025. The South Asian nation secured about $334 million in IMF loans this month, helping bolster economic recovery.

It needs to increase energy prices and meet fiscal parameters to continue getting funds from the lender.

Industrial production grew 13.1% in the three months to December from a year ago, compared to 10.1% in the previous quarter. Services sector expanded 2.5% last quarter, while agricultural output contracted 2.2% during the period.

Sri Lanka’s central bank held its benchmark interest rate at 8% in the first policy meeting of 2025, to help inflation reach the target while supporting an economic revival. The next policy decision is scheduled for Mar. 26.

(Anusha Ondaatjie – Bloomberg)