Sri Lanka is set to introduce a new Economic Transformation Law that aims to attract investors and boost productivity in the country. This law comes at a crucial time for Sri Lanka, which faced a severe financial crisis in 2022.
The Economic Transformation Bill, along with the Public Finance Management bill, will be presented to parliament this week. These laws are vital to ensure that Sri Lanka can recover from its financial woes and achieve sustainable growth. The targets set under the $2.9 billion IMF program will be legally mandated by this new law. These targets include reducing the debt to GDP ratio and debt servicing costs.
Sri Lanka secured a $2.9 billion bailout from the IMF in April last year, which significantly improved its economic outlook. The country is expected to see growth of 3% this year. The new law aims to solidify the progress made under the IMF program and set a clear path for future economic growth.
Despite the positive developments, Sri Lanka still faces challenges, such as resuming talks with bondholders after a previous round ended inconclusively. Additionally, with presidential elections approaching, there is uncertainty about the continuity of current economic policies. Opposition parties have hinted at revisiting taxation and IMF targets if they come to power.
Sri Lanka’s new Economic Transformation Law represents a crucial step towards stabilizing the country’s economy and attracting much-needed investments. By aligning with the targets set under the IMF program, Sri Lanka can work towards reducing debt and achieving sustainable growth. However, challenges remain, and the upcoming elections could bring further uncertainty. It is essential for Sri Lanka to stay committed to its economic reform agenda to ensure long-term prosperity.
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