Sri Lanka Knowledge

Question 1

What monetary policies have been used?

Answer 1

Central Bank of Sri Lanka (CBSL) had interest rate of 6% pre crisis in 2021
Financial crisis in 2022 meant hyperinflation (49.7%) due to currency collapse
So interest rates went to 30% to attract FDI, increasing demand for Sri Lankan Rupee (LKR) stabilising and slowing down depreciation
Then cut rate to 15% in 2023 to boost economy as economy shrank, but still high to ensure inflation doesn’t rebound and restore confidence in economy

Question 2

What fiscal policies have been used?

Answer 2

VAT increase from 8% to 15% in 2025 budget to reduce fiscal deficit and debt (103.9% of GDP)

Question 3

What market based policies have been used?

Answer 3

Privatisation of state-owned enterprises (2023) to improve efficiency and reduce fiscal burden
Including Sri Lankan Airlines

Question 4

What interventionist policies have been used?

Answer 4

Solar Power Project (2023) of $500mil to respond to 2022 fuel shortages and saves $200mil imports of oil fuel

Question 5

5 key stats

Answer 5

Poverty - 25% (2024)
$5.5bn (45% of exports) on textiles
$1.2bn of tea exports
1.5mil tourism 2023 but only 500k 2022
Sri Lankan Rupee (LKR) fell 80% in 2022 then recovered 11.5% (2024)