Washington, DC: The
Executive Board of the International Monetary Fund (IMF) completed today
the first review under the 48-month Extended Fund Facility (EFF)
Arrangement. The completion of the first review allows for an immediate
disbursement of SDR 254 million (about US$337 million), bringing the total
IMF financial support disbursed so far to SDR 508 million (about US$670
million).
The total amount of Sri Lanka’s EFF Arrangement is SDR 2.286 billion
(about US$3 billion) as of the time of program approval on March 20, 2023
(see
Press Release
). The program supports Sri Lanka’s efforts to restore macroeconomic
stability and debt sustainability, safeguard financial stability, and
enhance growth-oriented structural reforms.
Following the Executive Board discussion on Sri Lanka, Mr. Kenji Okamura,
Deputy Managing Director, issued the following statement:
``Macroeconomic policy reforms are starting to bear fruit and the economy
is showing tentative signs of stabilization, with rapid disinflation,
significant revenue-based fiscal adjustment, and reserves build-up.
``Performance under the EFF-supported program has been satisfactory. All
quantitative performance criteria for end-June were met, except the one on
expenditure arrears. All indicative targets were met, except the one on tax
revenues. Most structural benchmarks were either met or implemented with
delay by end-October 2023. The publication of a Governance Diagnostic
Report, the first in Asia and a structural benchmark under the program, is
a commendable first step towards addressing deep-rooted corruption
weaknesses. Continued commitment to improving governance and timely
implementation of the report’s recommendations can deliver tangible
economic gains to all citizens.
``Sri Lanka’s agreements-in-principle with the Official Creditors Committee
and Export-Import Bank of China on debt treatments are consistent with the
EFF targets. They are an important milestone putting Sri Lanka’s debt on
the path towards sustainability. A swift completion and signature of the
Memoranda of Understanding with the official creditors is important. Timely
implementation of the agreements, together with reaching a resolution with
external private creditors on comparable terms, should help restore Sri
Lanka’s debt sustainability over the medium term.
``To ensure a full and swift recovery, sustaining the reform momentum and
strong ownership of reforms is of paramount importance. Key priorities
include advancing revenue mobilization, aligning energy pricing with costs,
strengthening social safety nets, rebuilding external buffers, safeguarding
financial stability, eradicating corruption, and enhancing governance.
``Reinforcing the revenue-based fiscal consolidation supported by revenue
administration reforms is critical to recover from program slippages and
promote a break from past policy shortcomings.
``The Central Bank of Sri Lanka should continue to focus on the
multi-pronged disinflation strategy to safeguard the credibility of its
inflation targeting regime. Accumulating reserves, supported by exchange
rate flexibility, remains an important priority under the EFF.
``Implementing the bank recapitalization plan and strengthening financial
supervision and crisis management framework are crucial to safeguard
financial sector stability.
``Further strengthening the social safety net and protecting social
spending remains critical to safeguarding the poor and vulnerable.’’
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Sri Lanka: Selected Economic Indicators 2020-2028
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2020
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2021
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2022
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2023
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2024
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2025
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2026
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2027
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2028
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Est.
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Projections
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GDP and inflation (in percent)
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Real GDP
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-4.6
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3.5
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-7.8
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-3.6
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1.8
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2.7
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3.0
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3.1
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3.1
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Inflation (average) 1/
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4.6
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6.0
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45.2
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17.9
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7.9
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5.6
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5.4
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5.3
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5.2
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Inflation (end-of-period) 1/
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4.2
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12.1
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54.5
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4.8
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6.6
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5.6
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5.4
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5.3
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5.2
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GDP Deflator growth
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3.3
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8.5
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48.8
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20.4
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10.1
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6.3
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5.4
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5.3
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5.2
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Nominal GDP growth
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-1.5
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12.3
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37.2
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16.1
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12.1
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9.1
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8.6
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8.5
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8.5
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Savings and investment(in percent of GDP)
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National savings
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31.6
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33.0
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33.4
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31.8
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30.8
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30.5
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30.9
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31.4
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31.4
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Government
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-8.3
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-7.3
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-6.2
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-6.0
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-3.1
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-0.9
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-0.3
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0.3
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0.6
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Private
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39.9
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40.3
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39.7
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37.8
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33.9
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31.4
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31.3
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31.1
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30.8
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National investment
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33.0
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36.7
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34.4
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30.3
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31.6
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31.6
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32.0
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32.4
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32.3
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Government
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6.2
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7.4
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7.0
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4.1
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5.1
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5.1
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5.0
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5.0
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5.0
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Private
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26.8
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29.4
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27.4
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26.2
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26.5
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26.5
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27.0
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27.4
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27.2
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Savings-Investment balance
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-1.4
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-3.7
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-1.0
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1.5
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-0.8
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-1.1
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-1.1
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-1.0
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-0.8
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Government
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-14.5
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-14.7
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-13.3
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-10.1
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-8.2
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-6.0
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-5.3
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-4.7
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-4.4
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Private
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13.1
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11.0
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12.3
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11.6
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7.5
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4.9
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4.3
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3.8
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3.6
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Public finance (in percent of GDP)
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Revenue and grants
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8.8
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8.3
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8.3
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10.2
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13.0
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15.0
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15.0
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15.1
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15.2
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Expenditure
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21.0
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20.0
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18.5
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19.0
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20.3
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20.3
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19.7
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19.3
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19.1
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Primary balance
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-5.9
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-5.7
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-3.7
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-0.7
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0.8
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2.3
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2.3
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2.3
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2.3
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Central government balance
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-12.2
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-11.7
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-10.2
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-8.8
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-7.3
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-5.3
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-4.7
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-4.2
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-3.9
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Central government gross financing needs
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26.1
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31.0
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33.9
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27.8
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25.3
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23.0
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19.8
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17.1
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12.3
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Central government debt
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96.7
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|
102.7
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115.5
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107.8
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110.3
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111.4
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110.8
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108.0
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104.6
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Public debt 2/
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105.1
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|
114.9
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|
125.8
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114.1
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115.9
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116.3
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115.1
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111.7
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107.9
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Money and credit (percent change, end of
period)
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Reserve money
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3.4
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35.4
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3.3
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9.0
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16.9
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9.1
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8.6
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8.5
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8.5
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Broad money
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23.4
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13.2
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15.5
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7.0
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18.2
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9.1
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8.6
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8.5
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8.5
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Domestic credit
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24.6
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19.5
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18.8
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5.5
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10.6
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3.0
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2.0
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3.7
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3.2
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Credit to private sector
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6.5
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13.1
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6.4
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0.3
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7.7
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8.7
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9.4
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9.6
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9.5
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Credit to private sector (adjusted for
inflation)
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1.9
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7.2
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-38.8
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-17.6
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-0.2
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3.2
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4.0
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4.3
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4.3
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Credit to central government and public
corporations
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53.6
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26.5
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31.1
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9.8
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12.8
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-1.0
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-3.7
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-1.5
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-3.0
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Balance of Payments (in millions of U.S.
dollars)
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Exports
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10,048
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12,499
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13,106
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12,365
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13,555
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14,377
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15,111
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15,846
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16,651
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Imports
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-16,055
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-20,638
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-18,291
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-17,887
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-20,718
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-23,002
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-24,322
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-25,144
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-26,049
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Current account balance
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-1,187
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-3,285
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|
-744
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|
1,232
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|
-634
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-908
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-879
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-846
|
-764
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Current account balance (in percent of GDP)
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-1.4
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-3.7
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-1.0
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1.5
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-0.8
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-1.1
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-1.1
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-1.0
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-0.8
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Current account balance net of interest (in
percent of GDP)
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0.5
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-2.1
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0.1
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2.9
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1.2
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0.9
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0.9
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1.1
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1.3
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Export value growth (percent)
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-15.9
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24.4
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4.9
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-5.7
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9.6
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6.1
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5.1
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4.9
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5.1
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Import value growth (percent)
|
-19.5
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|
28.5
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-11.4
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-2.2
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|
15.8
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11.0
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5.7
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3.4
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3.6
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Gross official reserves (end of period)
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|
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In millions of U.S. dollars
|
5,664
|
|
3,139
|
|
1,898
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|
3,806
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|
5,346
|
7,477
|
9,894
|
13,525
|
15,320
|
|
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In months of prospective imports of goods
& services
|
3.2
|
|
2.0
|
|
1.2
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|
2.0
|
|
2.6
|
3.4
|
4.3
|
5.7
|
6.2
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|
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In percent of ARA composite metric
|
46.0
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|
24.7
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|
16.4
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|
33.2
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|
44.7
|
59.9
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77.1
|
99.7
|
109.6
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|
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Usable Gross official reserves (end of
period) 3/
|
|
|
|
|
|
|
|
|
|
|
|
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In millions of U.S. dollars
|
5,664
|
|
1,565
|
|
462
|
|
2,371
|
|
3,910
|
7,477
|
9,894
|
13,525
|
15,320
|
|
|
In months of prospective imports of goods
& services
|
3.2
|
|
1.0
|
|
0.3
|
|
1.3
|
|
1.9
|
3.4
|
4.3
|
5.7
|
6.2
|
|
|
In percent of ARA composite metric
|
46.0
|
|
12.3
|
|
4.0
|
|
20.7
|
|
32.7
|
59.9
|
77.1
|
99.7
|
109.6
|
|
|
External debt (public and private)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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In billions of U.S. dollars
|
53.4
|
|
58.4
|
|
57.4
|
|
53.8
|
|
55.5
|
57.7
|
59.9
|
63.4
|
65.1
|
|
|
As a percent of GDP
|
63.2
|
|
65.9
|
|
76.7
|
|
64.7
|
|
68.0
|
70.4
|
71.8
|
72.7
|
70.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Memorandum items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Nominal GDP (in billions of rupees)
|
15,672
|
|
17,600
|
|
24,148
|
|
28,033
|
|
31,422
|
34,291
|
37,226
|
40,397
|
43,812
|
|
|
REER appreciation (percent, period average)
|
0.6
|
|
-6.0
|
|
-4.8
|
|
-5.2
|
|
-3.7
|
-5.8
|
-4.0
|
-1.5
|
0.0
|
|
|
Exchange Rate (period average)
|
185.6
|
|
198.8
|
|
322.6
|
|
…
|
|
…
|
…
|
…
|
…
|
…
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Exchange Rate (end of period)
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186.4
|
|
200.4
|
|
363.1
|
|
…
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…
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…
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…
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…
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…
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Sources: Data provided by the Sri Lankan
authorities; and IMF staff estimates.
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1/ Colombo CPI.
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2/ Comprising central government debt, publicly guaranteed
debt, and CBSL external liabilities
(i.e., Fund credit
outstanding and international currency swap arrangements).
3/ Excluding PBOC swap ($1.4bn in 2022) which becomes usable
once GIR rise above 3 months of previous year's import
cover.
|