Sri Lanka’s central bank has surprised markets by cutting interest rates for the first time in three years – a sign of confidence that the worst of Sri Lanka’s financial crisis is over.
Economic mismanagement, coupled with the effects of the COVID-19 pandemic, left Sri Lanka severely short of dollars for essential imports at the beginning of last year, tipping the island nation into its worst financial crisis in seven decades.
Severe shortages of food, medicine and fuel led to street protests that forced then-President Gotabaya Rajapaksa to flee the country and resign.
A new government took the reins in July and negotiated a $2.9bn bailout from the International Monetary Fund (IMF) in March. This was the 17th IMF bailout for Sri Lanka and the third since the country’s decades-long civil war ended in 2009.
Inflation, which hit a record high of about 70 percent in September, is coming down, government revenues are looking up and pressure on the country’s balance of payments is easing, Al Jazeera reports.
The government aims to complete talks to restructure its bilateral debt with other countries by September.
