📈 IFC Warns Sri Lanka: Stick to Reforms or Risk Stability

The International Finance Corporation (IFC) has urged Sri Lanka to maintain policy discipline, warning that "complacency" could undo the recovery achieved since the 2022 crisis. While the turnaround is "remarkable," the economy remains fragile. • Macroeconomic Performance • GDP Per Capita: Recovered to US$ 4,800 (up from US$ 3,800 in 2023). • Growth: 10 consecutive quarters of positive growth; projected at 4.85% (2025) and 4.5% (2026). • Debt: Reduced to 96% of GDP (from 114%), though interest payments still consume ~50% of revenue. • Reserves: Strengthened to US$ 6.8 Bn by end-2025. • Sector & Inflow Highlights • Tourism & Remittances: Primary recovery drivers; remittances reached US$ 8 Bn last year, while tourist arrivals hit 2.3 million. • FDI: Labeled the "most disappointing" indicator, remaining weak at less than 1% of GDP. • Apparel & ICT: Essential for the 7% growth target needed to double the economy within a decade. • Critical Risks & Policy • Complacency: Warning against slipping reforms to the "backburner" as crisis memories fade. • Fiscal Reform: Revenue rose to 15.6% of GDP, but low capital expenditure (2.1%) remains a growth constraint. • Stability: 10 years of uninterrupted macro-stability are required to achieve durable, high-speed growth.