Domestic economic activities in Sri Lanka has remained subdued in the fourth quarter of 2019, but in 2020, a revival in economic activity is anticipated, supported by appropriate fiscal and monetary measures and importantly improved business confidence and strong sense of political stability among people in general and the business community in particular, Central Bank Governor Prof W D Lakshman said.
Prof, Lakshman noted that low and stable inflation environment, exchange rate stability at competitive level, low lending rates as well as improved consumer and investor sentiment are likely to push the economy to reach its capacity level over the medium- term.
“The growth momentum of the economy will be sustained due to structural reforms designed in line with policy priorities of the government. A slow improvement is seen in the country’s external account, while the contraction in imports observed in 2019 is likely to continue in 2020.
Foreign capital flows, portfolio and direct investment, are expected to grow with improving business confidence. The workers’ remittances are expected to remain more or less stable without making significant gains,” he said.
He added ; “The major components of the ongoing policy reform in my view is the dependence placed on a coalition of three known forms of capital formation in growth which include domestic private capital, domestic state capital and foreign private capital.
Many are the incentives provided by the government to promote domestic private capital. The dependence placed on the SME sector and incentives provided to the SMEs indicate the government’s intention to build up a strong domestic entrepreneurial class through SMEs.”
Growth incentives being provided to domestic private capital effectively used should build up the desired domestic entrepreneurial class, Prof.Lakshman added. Speaking further, he said the pledge given by the government that SOEs will not be privatized indicates the dependence placed on the State capital segment of the coalition.
“ If the institutional and personal related reforms planned in this sector worked right , the large SOE sector should become an important partner to private capital and on the whole it is extremely useful to achieve targeted development objectives.
Within this broad framework of accumulation and management, he said the government is likely to move out of Washington consensus framework of policy perceived over the last several decades in Sri Lanka under the advice and guidance of Washington duo of the International Monetary Fund (IMF) and the World Bank.
Moreover he added that the IMF has distanced itself from the Washington consensus framework.
“In that case, the attempts by the present Sri Lankan regime to move away from that framework might even receive active IMF support.” Prof. Lakshman added
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