COLOMBO, — June 15 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 today.
The contraction in the first three months compared with shrinkage of 0.5 per cent in the corresponding period of 2022, and a decline of 12.4 per cent 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 US$46 billion 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 23.4 per cent and 5.0 per cent 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 0.8 per cent, 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 US$330 million of a US$2.9 billion bailout in late March.
It forecasts Sri Lanka's economy will contract by 3.1 per cent this year. The World Bank is more pessimistic, predicting a 4.2 per cent contraction.
The IMF warned earlier this month that Sri Lanka's recovery remained challenging, despite "tentative signs of improvement".
Inflation, which peaked at nearly 70 per cent in September, moderated to 25.2 per cent last month.
Foreign debt restructuring was previously held up as the country's main bilateral creditor, China, was initially reluctant to take a haircut and instead offered more loans to pay old debts.
Just over US$14 billion of the total foreign credit is bilateral debt to foreign governments, 52 per cent of which is owed to China. — AFP
