By Uditha Jayasinghe

COLOMBO (Reuters) - The World Bank raised its forecast for Sri Lanka's economy on Tuesday, projecting a growth of 2.2% for 2024, as the crisis-hit nation makes a faster-than-expected recovery from its worst financial crisis in decades.

Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) in March last year, helping it temper inflation, increase state revenue, and rebuild foreign exchange reserves after its economy crumpled in 2022.

The IMF programme helped Sri Lanka's economy stabilise, and it is expected to return to growth this year after contracting 2.3% in 2023.

The World Bank, in its latest report on South Asia, raised its growth forecast for Sri Lanka by 50 basis points. Real GDP growth was also expected to strengthen further to 2.5% in 2025, with modest recoveries in reserves, remittances and tourism, the development bank's report said.

South Asia, excluding Afghanistan, was expected to grow 6.1% in 2025, remaining the fastest-growing region in the world for the next two years, with India's expected growth of 6.6% for fiscal year 2025 leading the way.

The World Bank expects Pakistan's fiscal year 2024 growth at 1.8%, below the State Bank of Pakistan's projection of 2%-3%. Real GDP is seen expanding 2.3% in fiscal year 2025, the report said.