The World Bank said the country's medium-term outlook is clouded by pre-existing weaknesses and economic scarring from the pandemic.
"You need a more structural, medium-term solution and one of the biggest problems is the high debt to GDP ratio and that is not coming down under the growth forecast we have projected,” World Bank chief economist for the South Asia Region Hans Timmer told Reuters.
External public debt servicing requirements are estimated above $4 billion in 2022 and 2023. Public and publicly guaranteed debt is expected to reach 116.5 per cent of GDP in 2021 and to rise further in the next two years, the bank's data showed.
Sri Lanka has an array of international sovereign bonds and government securities maturing over the next three years, which analysts project will be difficult to repay given its low reserves of $3.5 billion, limited inflows and high budget deficit.
Continued macroeconomic challenges, particularly the high debt burden and deficit, large refinancing needs, and weak external buffers will adversely affect growth and poverty reduction over the medium term, the World Bank said.
Nearly 11 per cent of Sri Lanka's population is living below the poverty level of $3.20 per day, according to the World Bank's projection for 2021, compared with 9.2 per cent in 2019 before the pandemic.