Asia and Pacific > Sri Lanka

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International Monetary Fund. Asia and Pacific Dept
COVID-19 severely hit the economy, causing a loss of tourism receipts and necessitating several strict lockdowns. Pre-pandemic tax cuts and the impact of COVID-19 led to fiscal deficits larger than 10 percent of GDP in 2020 and 2021 and a rapid increase in public debt to 119 percent of GDP in 2021. Sri Lanka’s access to international capital markets was lost in 2020, prompting a decline of international reserves to critically low levels and large-scale direct lending to the government by the Central Bank of Sri Lanka (CBSL). External debt repayments and a widening current account deficit have led to foreign exchange (FX) shortages, while the official exchange rate has been de facto fixed since April 2021. Inflation is on the rise, reaching double digits in December 2021, reflecting imported inflation, supply shocks, and a pickup in domestic demand amid loose monetary policy.
International Monetary Fund. Middle East and Central Asia Dept.
Economic activity has rebounded strongly on the back of waning COVID-19 infections and expansionary fiscal and monetary policies. However, strong import growth—fueled by the macroeconomic policy mix, higher international commodity prices, and credit growth—have led to a marked deterioration of the external position. The current account deficit has widened, the rupee depreciated markedly, and inflation remains persistently high.
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses the report of technical assistance mission to Sri Lanka. The report highlights that Sri Lanka has embarked on a program of reform intended to enable the country to emerge as an internationally competitive middle level economy. The mission concentrated on practical, operational steps that the Securities and Exchange Commission (SEC) could take to build capacity to increase the deterrent impact of its enforcement program in the current and anticipated regulatory environments. The mission recommended that the SEC continues to pursue measures to improve efficiency, effectiveness and accountability. In order to augment the impact of the enforcement program, the SEC is encouraged to foster public transparency to the extent possible without compromising confidential enforcement processes and activities. While the recommendations in this report will improve the effectiveness of the SEC’s enforcement program, credible deterrence cannot be achieved without the new civil and administrative enforcement authority in the draft Securities Exchange Act.