Umamah Bakharia | ub@radioislam.co.za

2 min read
15 March 2023 | 22:20 CAT

Sri Lanka’s crisis-hit economy has shrunk by a record 7.8 percent in 2022 according to official data. This as the country faces its worst financial crisis in seven decades.

Picture credit: SC College Of Businesses

The island nations fourth-quarter Gross Domestic Product (GDP) contracted by 12.4%, according to the figures released by the state-run census and statistics department.

However, analysts predict that Sri Lanka’s growth is expected to shrink by 3 percent this with growth expected to rebound in 2024.

The economic crisis sparked huge protests in July last when a mob stormed the home of then-President Gotabaya Rajapaksa, accusing him of worsening the crisis which forced him to flee the country and resign.

Since then, a new government headed by President Ranil Wickremesinghe has been working to repair Sri Lanka’s public finances and secure a International Monetary Fund (IMF) bailout.

Last year’s contraction – the biggest in the country’s 75 years of independence – compared with 3.5 percent growth in 2021 and a 4.6 percent contraction in 2020 as the coronavirus pandemic hit.

New data showed some improvement in Sri Lanka’s fiscal position with inflation moderating to approximately 50 percent in February, a decrease from a record high of 69.8 percent in September last year.

Wickremesinghe has increased taxes while ending a generous subsidy on fuel and electricity in order to boost government revenue.

However, the tax and price hikes have been wildly unpopular and has since triggered protests and work production halts around the country.

Approximately 40 trade unions warned that they are planning on a general strike in the coming weeks if their demands for concessions on the austerity programme were not met by government.