Governor of the Central Bank of Sri Lanka, Indrajit Coomaraswamy said that the country was practicing exactly the opposite to which other countries were doing in terms of macroeconomic policies.
SMEs need to be linked up to a stable market base in order to reduce the financial problems.
Gracing the Experience Sharing Forum on local economic development in practice organized by the Industrial Services Bureau (ISB), he said that been second only to Japan at the time of independence on any social economic indicators, Sri Lanka had reduced its standings at a considerable state.
Difficulty in managing the performance of the budget and unsustainable development had paved the way for this.
“There are three key challenges faced in terms of macroeconomic policy making: government revenue policy making as a percentage to GDP, concessional and non concessional debt as a percentage to foreign debt and merchandise export as a percentage of GDP.” he said.
Accordingly the revenue needs to be increased in order to get out of the budget deficit problem. The current revenue of the country is 13.8% to GDP which should be increased up to 16.5%. The current expenditure rate is 20% GDP.
“In 2006 we had a non concessional debt percentage of 7.3 which increased to 54.8 by now. After been relieved from the low income state in 2007, the country had to rely on non concessional debts. Using these grants in projects which had given lesser returns in recent times had resulted in this situation. Hence we should concentrate more on obtaining greater return for our borrowing.”
Accounting for the recent statistics, merchandise exports have faced tremendous decrease of 13% in 2017 with comparison to year 2000. Unavailability of strategies to diversify the export products and not been able to make our products more complex has led to this situation.
“Only 7% of our exports are part of the regional or global export chain due to exchange rate been uncompetitive and the high import rates,” he further added.
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