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| Sri Lanka crisis: Central bank lays out extent of economic problems | Sri Lanka crisis: Central bank lays out extent of economic problems |
| (31 minutes later) | |
| People wait to buy kerosene during last year's fuel in Colombo, Sri Lanka | |
| Sri Lanka's central bank has laid out the extent of the country's worst economic crisis in more than 70 years. | Sri Lanka's central bank has laid out the extent of the country's worst economic crisis in more than 70 years. |
| In its annual report, the bank outlined how last year wages failed to keep up with the soaring cost of everything from food to fuel. | In its annual report, the bank outlined how last year wages failed to keep up with the soaring cost of everything from food to fuel. |
| "Several inherent weaknesses" and "policy lapses" helped to trigger the severe economic problems that engulfed the South Asian nation, the bank says. | "Several inherent weaknesses" and "policy lapses" helped to trigger the severe economic problems that engulfed the South Asian nation, the bank says. |
| The bank now expects the economy to return to growth next year. | The bank now expects the economy to return to growth next year. |
| The Central Bank of Sri Lanka forecast the economy will shrink by 2% this year, but expand by 3.3% in 2024. | The Central Bank of Sri Lanka forecast the economy will shrink by 2% this year, but expand by 3.3% in 2024. |
| The prediction is more optimistic than the International Monetary Fund (IMF), which predicted a contraction in 2023 of around 3% and growth of 1.5% next year. | The prediction is more optimistic than the International Monetary Fund (IMF), which predicted a contraction in 2023 of around 3% and growth of 1.5% next year. |
| The central bank's report also outlined how headline inflation reached almost 70% in September as prices of fresh fruit, wheat and eggs more than doubled. | The central bank's report also outlined how headline inflation reached almost 70% in September as prices of fresh fruit, wheat and eggs more than doubled. |
| At the same time the cost of transportation and essential utilities such as electricity and water rose even faster. | At the same time the cost of transportation and essential utilities such as electricity and water rose even faster. |
| Why is Sri Lanka in crisis? | Why is Sri Lanka in crisis? |
| Sri Lanka in first debt default in its history | Sri Lanka in first debt default in its history |
| Last year, the economy shrank by 7.8% and the country defaulted on its foreign debt for the first time since independence from the UK in 1948. | Last year, the economy shrank by 7.8% and the country defaulted on its foreign debt for the first time since independence from the UK in 1948. |
| Defaults happen when governments are unable to meet some or all of their debt payments to creditors. | Defaults happen when governments are unable to meet some or all of their debt payments to creditors. |
| This damaged its reputation with lenders, making it even harder to borrow money on the international markets. | This damaged its reputation with lenders, making it even harder to borrow money on the international markets. |
| "The Sri Lankan economy faced its most onerous year in its post-independence history," the report said. | "The Sri Lankan economy faced its most onerous year in its post-independence history," the report said. |
| An "unsustainable" economic model "steered the country towards a multifaceted disaster," it added. | An "unsustainable" economic model "steered the country towards a multifaceted disaster," it added. |
| Sri Lanka owes about $7bn (£5.7bn) to China and around $1bn to India. In February, both countries agreed to restructure their loans, giving Sri Lanka more time to repay them. | Sri Lanka owes about $7bn (£5.7bn) to China and around $1bn to India. In February, both countries agreed to restructure their loans, giving Sri Lanka more time to repay them. |
| Last month, the IMF agreed to lend Sri Lanka $3bn. That was on top of a $600m loan from the World Bank last year. | Last month, the IMF agreed to lend Sri Lanka $3bn. That was on top of a $600m loan from the World Bank last year. |
| Sri Lanka's government is currently negotiating its debt repayments with bondholders and creditors before the IMF reviews the situation in September. | Sri Lanka's government is currently negotiating its debt repayments with bondholders and creditors before the IMF reviews the situation in September. |
| Related Topics | Related Topics |
| Asia Business | Asia Business |
| Sri Lanka | Sri Lanka |