Sri Lanka is ready for its economic take off, while the government too would keep on introducing more economic relief packages towards this, said Prof. W. D. Lakshman, Governor, Central Bank, at the announcement of the Monetary Policy review.
Tax relief measures already announced by the government are expected to stimulate the economy, while actively contributing to improve business confidence.
“Recent tax reform initiatives constitute a much needed transformation of the country’s tax system towards greater simplicity,” he said.
“Any revenue shortfall due to changes in taxes announced recently, is expected to be largely offset by the action taken to eliminate unproductive current expenditure and to prioritize capital expenditure.”
“ It is expected that the fiscal consolidation path remains intact, while the level of public debt stock remains sustainable.”
Going forward in line with the philosophy of the new government, the Central Bank would continue to improve its contribution for the economy to progress as an upper middle income economy, through equitable and inclusive growth of real economic activity of the country.
He predicted that the growth of credit to the private sector is expected to pick up to around 12 - 13% by end 2020. This is sufficient to support a revival of economic activity.
Driven by the expected growth in private sector credit, growth of 15 broad money supply is likely to reach around 14 per cent by end 2020.
Required reforms are expected to widen the tax base, improve tax administration and compliance. Strengthening of state owned business enterprises through implementing essential reforms, would enhance government revenues and reduce the fiscal burden to maintain such entities, while ensuring better service delivery for the public and the business community.
In this regard, we welcome the ongoing efforts to improve the operational efficiency of state owned enterprises through a streamlined process to appoint professionals to manage such entities.
The Central Bank intends to set up a task force with the participation of relevant stakeholders to introduce an appropriate cost reflective benchmark interest rate for pricing loan products. We believe that this measure would improve healthy competition among banks.
Considering the need for timely intervention to revive the tourism industry in the aftermath of the Easter Sunday attacks and in line with the government policy, the Central Bank took necessary action to facilitate granting of concessions by licensed banks to individuals and entities in the tourism industry.
The Central Bank would continue to take appropriate measures to mitigate risks to the financial sector, stemming from global and domestic developments.
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