Sri Lanka’s ongoing economic crisis is estimated to have doubled the poverty rate from 13.1 percent to 25 percent and it is projected to remain above 25 percent for the next few years due to the multiple risks to households’ livelihoods, the World Bank said in its twice-a-year update on Sri Lanka this week.

“The crisis reversed years of gains in poverty reduction and human capital development,” the update said, noting that the crisis had added an additional 2.5 million poor people.

Vulnerability to income shocks has also increased with many non-poor households living close to the poverty line – 5.7 percent of the population lives less than 10 percent above the poverty line and a further 5.6 percent lives between 10 and 20 percent above it. All these households are highly vulnerable to falling into poverty in the event of a negative income shock, according to the report.

The international financial outfit also projected that the country’s economy would continue to face significant challenges this year and beyond with the country’s economy contracting by 4.3 percent this year, while demand continued to be subdued, job and income losses intensified, and supply-side constraints adversely affected production.

“Growth prospects are subject to high uncertainty and will depend on the progress of debt restructuring with timely and effective implementation of fiscal consolidation, and growth-enhancing structural reforms,” the World Bank said, while pointing out that the country could use this crisis as an opportunity to build a strong and resilient economy.

(Sunday Times)