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ECONOMYNEXT - Sri Lanka's economy will grow 5.3 percent backed by a deal with the International Monetary Fund and more taxes collected from the people to meet state spending and subsidies, the Asian Development Bank said.
"Fiscal consolidation is to be put back on track by a revision of the 2016 budget,” Tadateru Hayashi, Senior Country Economist at ADB’s Sri Lanka Resident Mission in Colombo said in a statement.
"IMF support, once agreed, will protect against expected pressures from external imbalances as it builds international confidence and facilitates fiscal consolidation and tax reform. A national development strategy will facilitate investment, both domestic and foreign."
In 2017 growth is forecasted to rise to 5.8 percent.
Sri Lanka is expecting to run a budget deficit of 5.4 percent in 2016 in a revised budget down from 5.9 percent originally forecasted with domestic borrowing reduced to 378 billion rupees which will help keep interest rates under check and hopefully allow the economy to grow at 6.0 percent.
Inflation is expected to be 4.5 percent in 2016 and will rise to 5.0 percent in 2017, the ADB said.
Sri Lanka rupee has been collapsing, under pressure from monetized debt, pushing up the price of traded goods, including medicines of the sick and the old.
The rupee has so far fallen from 131 to the US dollar to 149.50 levels with further falls expected before an IMF program comes.
However with market interest rates rising, domestic credit is expected to slow.
The ADB said the balance of payments would be under pressure with weak exports as a result of a global slowdown and weak worker remittances from the Middle East.
However, non-Mercantilist economic analysis indicates that falling exports or weak remittances - in the absence of monetizing - should not affect either the exchange rate or foreign reserves - but would only reduce domestic spending power therefore imports and economic activity.
An expected renewal of GSP+ trade concessions could boost exports, ADB said. (Colombo/Mar30/2016)
"Fiscal consolidation is to be put back on track by a revision of the 2016 budget,” Tadateru Hayashi, Senior Country Economist at ADB’s Sri Lanka Resident Mission in Colombo said in a statement.
"IMF support, once agreed, will protect against expected pressures from external imbalances as it builds international confidence and facilitates fiscal consolidation and tax reform. A national development strategy will facilitate investment, both domestic and foreign."
In 2017 growth is forecasted to rise to 5.8 percent.
Sri Lanka is expecting to run a budget deficit of 5.4 percent in 2016 in a revised budget down from 5.9 percent originally forecasted with domestic borrowing reduced to 378 billion rupees which will help keep interest rates under check and hopefully allow the economy to grow at 6.0 percent.
Inflation is expected to be 4.5 percent in 2016 and will rise to 5.0 percent in 2017, the ADB said.
Sri Lanka rupee has been collapsing, under pressure from monetized debt, pushing up the price of traded goods, including medicines of the sick and the old.
The rupee has so far fallen from 131 to the US dollar to 149.50 levels with further falls expected before an IMF program comes.
However with market interest rates rising, domestic credit is expected to slow.
The ADB said the balance of payments would be under pressure with weak exports as a result of a global slowdown and weak worker remittances from the Middle East.
However, non-Mercantilist economic analysis indicates that falling exports or weak remittances - in the absence of monetizing - should not affect either the exchange rate or foreign reserves - but would only reduce domestic spending power therefore imports and economic activity.
An expected renewal of GSP+ trade concessions could boost exports, ADB said. (Colombo/Mar30/2016)
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