Sri Lanka’s Finance Minister outlines three major policy priorities to rebuild economy

(COLOMBO, LANKAPUVATH) – Sri Lanka’s Finance and Media Minister Mangala Samaraweera yesterday said the government is looking forward to and focusing on rebuilding and re-positioning the country after the disruptions and have three major economic policy priorities.

The Minister said ensuring continued access to global capital markets at an affordable rate to enable the government to re-finance external debt this year is a priority.

Uplifting economic growth through Enterprise Sri Lanka and Gamperaliya and continuing government’s reform program to build competitiveness of the economy are the other priorities.

Addressing the inaugural meeting of the Breakfast Buzz series organized by the American Chamber of Commerce (AmCham) in Sri Lanka on Thursday at the Colombo Hilton, Minister Samaraweera said after the government was re-instated in December following the 52-day coup, it has taken a great deal of hard work to bring the country back to stability from the cataclysmic disruptions to the economy during that period.

He said the resulting loss in confidence triggered a surge in capital flight from Sri Lanka’s debt and equity markets – bleeding over a billion dollars from the hard earned foreign reserves and causing the currency to depreciate. Sri Lanka’s credit ratings were downgraded resulting in external borrowing cost surging into double digit levels.

Since then, the government has repaired the damage to the external sector and markets have regained confidence in the last 2 months. “Today our external borrowing costs have declined by over 200 basis points – assuming USD 3 billion in fresh borrowings this year that translates into a saving of over LKR 10.8 billion” the Minister highlighted.

Foreign capital is now flowing back into the economy with LKR 8 billion inflows into government securities since January – and the rupee has also appreciated 2.3% year to date.

“We will continue to build competitiveness by liberalizing the economy where we see excessive controls and costs. We are also investing heavily in training and skills development – we will work closely with the private sector in building the relevant skills.”

He said Sri Lanka is implementing a rules-based economic framework that will create confidence in the sustainability of the policy outlook. The Inland Revenue Act for instance is an important piece of legislation that reduces individual discretion and builds in predictability.

The same applies to a market based fuel pricing mechanism. “We will explore similar practices in other areas that help instill certainty and predictability,” he added.

“A key element of this would be the continuation of the IMF program which will signal to markets our continued commitment to disciplined, rules based economic management. The IMF staff mission is in Colombo this week continuing negotiations with officials of the Treasury and the Central Bank. Our objective is to ensure responsible fiscal policies whilst enabling space to invest in targeted growth supportive measures.”

“We will continue to consult with industry in policy implementation and provide the necessary time frames for industry to adjust to such measures. I assure you that these principles will inform our budget process this year and the years to come.”

AMCHAM Sri Lanka presented the first of the ‘Breakfast Buzz’ series for 2019 titled “Changing the Paradigm: Crafting and Implementing Evidence Based Policies”. Minister Mangala Samaraweera delivered the Keynote Speech.

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