Colombo, Jun 9 (IANS): Sri Lanka is expected to see 5.3 per cent economic growth in the next three years despite challenges, the latest Global Economic Prospects report released by the World Bank showed on Thursday.

"Although facing monetary and fiscal tightening, growth of the island will (occur due to) infrastructure spending financed with sizable FDI flows... Recent restraint imports policy will also contribute to growth in this year, and both 2017 and 2018," Xinhua news agency quoted the World Bank as saying.

The report notes that in Sri Lanka expansionary fiscal policy has contributed to the increased deficit and debt levels with government debt levels above 70 percent of GDP. Moreover, rising core inflation and high credit growth have compelled the central bank to tighten policy.

However, the report said Sri Lanka was also making efforts to prevent the deterioration in public finances, including the increase of the VAT rate from 11 to 15 per cent.

The report suggested Sri Lanka to take such measures as strengthening public financial management, broadening the tax base, reducing exemptions and improving tax administration against the backdrop of a fragile global economy.