The year 2023 appears to be ending with a sign of gradual improvement in the country’s economic situation, despite an economic emergency.
However, during this turbulent year for the economy, a staggeringly high inflation rate of 30% endangered the lives of the poverty-stricken masses.
Where a $6 billion programme with the International Monetary Fund failed, a $3 billion fresh stand-by agreement provided some respite to the dwindling economy. After successful negotiations for the next installment of $700 million, the staff-level agreement was reached, and an IMF Executive Board approval will pave the way for further external funding.
The high flight of the dollar and the 22% high interest rate also caused a slump in business activity; however, exports increased significantly owing to a drop in the current account and trade deficit.
Last year, the PDM government could not achieve its economic targets. In the 2022-23 financial year, the growth rate had to be revised to -0.17% when the claims of 0.3% growth rate fell flat.
The current account deficit gradually decreased to $3.26 billion, while it was a record $17.48 billion in 2022.
During 2023, the trade deficit also decreased significantly by 34% due to a decrease in imports, while exports increased by about 2% and exceeded $12 billion.
In the first quarter of the current financial year, GDP growth was 2.1%, but a significant increase in the prices of electricity, gas, and food items became a hindrance in public relief.
The prices of petrol and diesel increased by Rs52.5 and 48.5, respectively, due to which the petrol tariff rose to Rs276 from an earlier Rs215, while that of diesel reached Rs276 from an earlier Rs228.
At the start of the financial year, the American dollar appreciated by Rs57, as its rate in the interbank market increased from Rs226 to Rs283. In May 2023, the inflation rate reached a record 38%, however, the year is ending with a rate of 29.2%, which is still higher than the annual target of 21%.
With the prime interest rate reaching a high of 22%, the private sector faced difficulties in accessing credit.
Business activities were hampered, however, a significant increase in government borrowing from commercial banks was also recorded.
