Sri Lanka’s economy thrives on tourism surge

Saturday, March 16, 2024

The Sri Lankan government announced today a significant rebound in the economy during the fourth quarter of 2023, following the nation’s unprecedented financial crisis. This resurgence was primarily driven by a notable increase in tourism arrivals.

Economic Expansion

According to the census and statistics department, Sri Lanka’s economy expanded by 4.5 percent in the December quarter, a stark improvement from the 12.4 percent contraction witnessed a year earlier. This growth was propelled by advancements in agriculture, industries, and services sectors.

Yearly Overview

Despite the fourth-quarter surge, the economy contracted by 2.4 percent overall in 2023, in comparison to the severe 7.8 percent contraction experienced in 2022. The latter was marked by the country’s default on its US$46 billion foreign debt.

Departmental Statement

The census and statistics department noted a peculiar trend in Sri Lanka’s economic performance throughout 2023. It highlighted a period of negative growth in the first half of the year, followed by a robust recovery in the latter half.

Tourism and Remittances

Toward the end of 2023, Sri Lanka witnessed a long-awaited surge in tourism, contributing significantly to the economic resurgence. Additionally, improvements in worker remittances further bolstered the economy.

Tourism Metrics

In December, the number of tourists visiting Sri Lanka skyrocketed to 210,000, more than double the figure recorded a year earlier, which stood at 91,900.

Financial Rehabilitation Efforts

Presently, Sri Lanka is in the process of drawing down a four-year US$2.9 billion bailout loan from the International Monetary Fund (IMF). Additionally, negotiations with foreign creditors are underway regarding a debt restructuring plan.

Economic Crisis Fallout

The peak of the economic crisis in 2022 resulted in severe shortages of food, fuel, and pharmaceuticals, as the island nation faced a depletion of foreign exchange reserves necessary for imports. Civil unrest ensued, leading to the ousting of then-President Gotabaya Rajapaksa.

Fiscal Reforms Under New Leadership

Under the leadership of successor Ranil Wickremesinghe, the Sri Lankan government has implemented various fiscal reforms. These include tax increases, the withdrawal of energy subsidies, and price adjustments on essential commodities to bolster state revenue.

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