The Sri Lanka development update reporttalks about the recent economic developments in Sri Lankafor the year 2015-2016. With no exception, Sri Lanka alsofaced the challenges of a trying global environment in 2015.Uncertainties in an election year that saw a major politicaltransition contributed to elevate the risks stemming fromglobal context. The accommodative policy choices supportedeconomic growth. Authorities took policy measures aimed atstability, beginning 2016.The fiscal deficit rose sharplyin 2015 due to increased expenditures in salary hikes andsubsidies, one-off charges, reduced consumption taxes andincreased interest costs on resultant deficit financing. Anew IMF program is providing a solid platform for macrofiscal stability. World Bank supports the government’sreform agenda, to eliminate obstacles to private sectorcompetitiveness, enhance transparency and public sectormanagement and improve fiscal sustainability. The governmenthas undertaken to implement a medium-term reform agenda thataims to improve competitiveness, governance and publicfinancial management that would bring in long-term benefits.These developments have contributed to an improved outlook.Growth is expected to remain unchanged in 2016 and growmarginally over 5.0 percent beyond, driven by privateconsumption and postponed FDI in 2015. The special focussection discusses the Systematic Country Diagnostic (SCD)for Sri Lanka, launched by the World Bank in February 2016.The SCD is an objective, evidence-based, candid assessmentof the main challenges facing the country, withoutlimitation to the areas where the WBG is currently engaged.
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