CBSL governor stays real on recovery in 2027

Fact Check

In response to a question at the monetary-policy press briefing, Governor of the Central Bank of Sri Lanka (CBSL) Nandalal Weerasinghe asserted that, although national output typically falls after an economic crisis, Sri Lanka would regain its pre-crisis peak (2018 level) “next year or, at most, the following year.”

To verify this claim, FactCheck.lk consulted the IMF World Economic Outlook database and the IMF’s Third Review under Sri Lanka’s Extended Fund Facility (March 2025).

The governor’s statement contains two claims: (i) countries generally experience an output loss after a crisis that requires time to reverse, and (ii) Sri Lanka will reach its 2018 output level by 2026—or, at the latest, 2027.

Do countries generally experience an output loss after a crisis?

In the past ten years, 15 sovereign debt restructuring episodes have occurred across 12 countries. In four of these episodes, there was no output loss (GDP contraction). But in the remaining 11 episodes, GDP contracted either in the year of the debt suspension or the year immediately following. Of these, two countries—Suriname and Ukraine—have yet to return to their pre-crisis output levels, defined as the highest real GDP recorded in the five years prior to the suspension.

Exhibit 1 highlights the cumulative GDP contraction and the time taken to recover the pre-crisis output levels for 13 debt restructuring episodes (excluding the two countries that have yet to recover to their pre-crisis output levels).

This evidence supports the governor’s first claim: most economies that go into a crisis of suspending debt repayments do suffer an initial GDP contraction from previous levels.

Will Sri Lanka reach its 2018 output by at least 2026/2027?

Among the nine debt restructuring episodes where countries recovered their pre-crisis GDP levels, six recovery was achieved within three years, and the other three were achieved within six years (see Exhibit 1).

FactCheck.lk applied the IMF’s latest growth projections for Sri Lanka, which estimate real GDP growth of 3% for 2025 and 2026. At this projected pace, Sri Lanka’s real GDP is expected to surpass its 2018 pre-crisis output level by 2027—five years after the crisis began (see Exhibit 2). Therefore, the governor’s stated recovery window of 2026/2027 is consistent with the IMF’s projections. However, this timeline would make Sri Lanka the second slowest to recover among recent debt restructuring episodes, with only Argentina taking longer.

In sum, the governor is correct in asserting that output losses commonly follow a debt crisis, and that Sri Lanka is on track to regain its 2018 output level by 2027.

Therefore, we classify the governor’s statement as TRUE.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.

Exhibit 1: Time taken to reach pre-crisis maximum real output*

*Note: The Pre-Crisis Maximum is defined as the highest real GDP achieved 5 years before the crisis.

Source: IMF World Economic Outlook