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The Central Bank of Sri Lanka said that the country's economy plagued by the worst-ever crisis since independence that has plagued the island nation since early 2022, is expected to recover gradually from the second half of this year.

The central bank announced its monetary policies for 2023 on Wednesday, saying that rapid acceleration of inflation that began from early 2022 turned around in October, reports Xinhua news agency.

"The Sri Lankan economy, which is projected to register a real contraction of around 8.0 per cent in 2022, is expected to record a gradual recovery in the second half of 2023 and sustain the growth momentum beyond," the bank said.

The central bank said that structural economic impediments that existed across various spheres of the economy over decades were compounded by economic shocks, along with ill-timed policy choices.

As a result, the government and the central bank implemented painful, but unavoidable policy measures in 2022, aimed at restoring macroeconomic balance.

The monetary policy was tightened by an unprecedented adjustment in interest rates to prevent inflationary pressures from worsening while arresting any adverse inflation expectations in the near to medium term.

A temporary suspension of selected foreign debt was also announced amidst the dire foreign exchange shortage, while measures were adopted to consolidate public debt with the envisaged support from an extended fund facility arrangement from the International Monetary Fund.

The central bank said these measures ensured the availability of foreign exchange for essential imports, including fuel, coal, cooking gas, medicine, and food items, among others, thereby relieving socioeconomic unrest to a greater extent.