The World Bank noted that the Sri Lankan economy will continue to face significant challenges in 2023 and beyond.

The baseline scenario projects the economy to contract by 4.3 percent in 2023 – following the contraction of 7.8 percent in 2022 – as demand continues to be subdued, job and income losses intensify, and supply side constraints adversely affect production.

The World Bank also said that the restructuring of external as well as certain domestic debt will be needed to restore debt sustainability. It added that a strong and credible structural reform program is critical to avoid a prolonged crisis and address the root causes of the current economic difficulties.The World Bank said that firm resolve of political leadership and Sri Lankan citizens will be required to overcome the crisis through several structural reforms.

It added that meaningful outcomes of debt restructuring, and the collective support of international partners will also be needed to maintain the reform momentum and chart the course for a speedy and robust economic recovery.It noted that better-targeted social assistance, a recovery in more productive sectors, and an increase in the real value of incomes will be needed to reduce poverty.

The World Bank said that Sri Lanka can use this crisis as an opportunity to build a strong and resilient economy.It said the crisis provides a unique opportunity to implement deep and permanent structural reforms that may be difficult in normal circumstances. The World Bank said that higher income groups, in particular, will need to take more of the burden to protect the poor and vulnerable, as Sri Lanka embarks on this journey towards a stronger and more resilient economy.