COLOMBO: Sri Lanka’s ailing economy grew at a slower-than-expected 4.8 percent last year despite lower oil prices as a slowdown in European markets hit exports, the central bank said on Tuesday.
Prime Minister Ranil Wickremesinghe said his government had inherited a “very bad situation” when it came to power early last year but that things were improving.
“We are turning the economy around,” he said.
“We do not have a balance of payment crisis anymore. We may have had it before, but not now.”
The news of a slowdown in growth from 4.9 percent in 2014 came as Sri Lanka negotiates with the International Monetary Fund for a bailout to help fund substantial debt repayments.
The bank had forecast last year’s growth would be better than in 2014, when strongman president Mahinda Rajapakse was in office. He was toppled at elections in January 2015.
But the bank said a slowing down of net foreign exchange inflows, including worker remittances, and capital outflows had generated a balance of payments deficit.
It came despite the welcome effect of a sharp drop in oil prices—Sri Lanka is dependent on imported crude.
Sri Lanka sought an International Monetary Fund (IMF) bailout immediately after the new government took office in January last year but the fund turned down the request at the time, saying the country’s reserves were at a comfortable level.
It had received $2.6 billion from the IMF in 2009 to boost its financial reserves, which dropped below $1 billion at the height of fighting between Tamil Tiger rebels and troops.
The IMF said two weeks ago that it was on track to agree a bailout loan for Sri Lanka that is expected to be worth just over $1.0 billion drawn over a period of 36 months.
But Wickremesinghe told journalists Tuesday it could take some time to finalize the deal.
“It will be worked out. Give us a few more months,” he said.
But he conceded the country’s revenues were inadequate to meet state spending.
From May 2 the government is increasing value-added tax from 11 percent to 15 percent to boost revenue while taking administrative measures to reduce tax exemptions offered to new investments.