COLOMBO– Sri Lanka will remain a middle-income country, announced the President’s Media Division on Tuesday (11), an hour after the Cabinet Spokesperson said the Cabinet of Minister gave the approval to classify Sri Lanka as the low-income country from a lower-middle income country.
The President’s Media Division said the Government is pursuing a “reverse graduation” policy for a limited period of time.
Earlier on Tuesday October 11, Cabinet Spokesperson Dr. Bandula Gunawardena told reporters in Colombo that Sri Lanka’s Cabinet has granted approval to downgrade Sri Lanka to a low-income country from lower-middle income country.
“Sri Lanka was a middle-income country as per the global classification. Give the middle-income status we cannot access concessionary loans from overseas,” he told reporters.
He revealed that the income of persons following the economic crisis dropped drastically, and it fell even further in 2022.
The Minister said that global agencies had recommended to the Finance Minister to downgrade the status of Sri Lanka in order for them to provide concessionary loan assistance to Sri Lanka.
The Sri Lankan Cabinet of Ministers on Monday (10) had taken up a proposal for Sri Lanka to revert from a middle-income country to a low-income country.
This was with the aim of obtaining concessionary funding from the International Development Association (IDA) — an arm of the World Bank which helps the world’s poorest and most vulnerable countries.
The decision has been taken after considering the financial constraints, including lack of foreign reserves, inflation and difficulty in meeting debt payments.
The government also has taken into consideration the claim that some former officials had manipulated figures to push Sri Lanka to a middle-income country.
The move effectively will mean that Sri Lanka will be seeking a ‘reverse graduation’ to IDA on the grounds that the country lacks creditworthiness to borrow on market terms, including from the International Bank of Reconstruction and Development (IBRD) — the lending arm of the World Bank – and, therefore, requires concessional resources to finance the country’s development programmes.