Election Uncertainty, Reform Delays Could Derail Economic Progress - ADB

COLOMBO (News 1st); The Asian Development Bank forecasts Sri Lanka’s economy to record moderate growth of 1.9% in 2024 and 2.5% in 2025 following 2 consecutive years of contractions.

However, the ADB warns that there might be a potential decline in the country's economic prospects due to the uncertainty associated with the upcoming elections, including any possible impact on fiscal policy and reform implementation. 

It added that commitment to the reform program will also be tested by efforts to balance public sentiment with the implementation of the IMF program. 

The Asian Development Bank also noted that delays in the completion of a debt restructuring agreement and any barriers to passing key legislation could dampen sentiment and derail growth.

The ADB said that the pandemic and the subsequent socioeconomic crisis reversed more than a decade of gains against poverty. 

While inflation has subsided to single digits, prices continued to be elevated, with the average index 91.8% higher in 2023 than in 2021. 

Wages have failed to keep up with rising prices, prolonging the squeeze on purchasing power and pushing more people into poverty. 

It added that the near-term priority during economic recovery is to lay institutional and structural frameworks for an inclusive social protection system. 

In the absence of a cohesive social protection strategy and governance mechanism, programs in the past have been fragmented, with low coverage, poor targeting, high inclusion and exclusion errors, and low payments.

In 2023, however, the government introduced the Aswesuma program to consolidate over 25 statesponsored cash-transfer programs that were previously managed by several government agencies. 

The new social protection program covers nearly 40% of the population at various income levels and includes a selfregistry database for a more objective and streamlined selection process aimed at minimizing leakage. 

Thisnprogram can be further strengthened with increased individual support, better forward planning and an effective graduation mechanism with technical and life skills training, better financial literacy education, and enhanced social and financial inclusion. 

The government must establish a comprehensive long-term strategy for poverty eradication that monitors progress and incorporates regular social dialogue to ensure the representation and participation of all stakeholders. 

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