• Government urged to prioritise digital economy and tourism
• Balancing growth and fiscal discipline crucial for long-term recovery

Sri Lanka’s new government should do everything to regain the ‘B’ credit rating by 2027-28 to pay back its creditors including the International Monetary Fund (IMF) through affordable market borrowings, World Bank Sri Lanka Lead Economist Gregory Smith said.

Speaking at a webinar by London based Overseas Development Institute (ODI) on Monday (18), he said that the government should do everything they can to regain a ‘B’ rating as the IMF goes from putting money to taking money out in a few years’ time.

He said that the borrowings from the market would be affordable under such a rating to repay some of the debt otherwise Sri Lanka will certainly have to go for another IMF programme to pay back the IMF.

Moreover, he said that during the discussions between the World Bank and the new government, they have stressed a few areas as priorities to develop the economy, such as tourism, exporting agro business and a digital economy.

“Digital economy is going to be huge, half in terms of creating IT jobs but also in terms of e-government and trying to make customs and tax collection much more efficient,” Smith said.

He said that the World Bank expects that Sri Lanka’s economy to bounce back by 4-4.5% with getting the economy back on its feet, “but then we go back to some of the structural impediments that might restrict growth to 3% next year.”

Further, he said that the government will have to trade-off between achieving growth and running primary surpluses as achieving primary surplus target through taxation is a really difficult thing to unravel.

He added that without growth, the debt burden is going to be huge in five years’ time while with growth it can be a little bit more manageable.