COLOMBO, Sept. 9 -- Sri Lanka has carried out one of the largest and fastest fiscal adjustments in its history, helping to stabilize an economy once on the brink of collapse, according to a new World Bank report released on Tuesday (9).

The review, titled 'Sri Lanka Public Finance Review: Towards a Balanced Fiscal Adjustment', notes that the country undertook fiscal reforms equal to nearly 8% of GDP over three years, placing it among the sharpest adjustments worldwide when compared with more than 330 similar efforts in 123 countries since 1980.

The report says the reforms have restored a measure of stability but also placed significant pressure on households through higher indirect taxes, declining real public-sector wages, and slower g...