(COLOMBO, LANKAPUVATH) – State Minister of Money & Capital Market and State Enterprise Reforms Ajith Nivard Cabraal suggested that the currency would appreciate. He suggested that the current levels were below par.
Cabraal said, “very soon an announcement will be made about a special attraction that would be done to woo the capital back. We take some of the uncertainties of the depreciation of the rupee away from them so that they can focus on the normal yield. If you give them too many risks they will shy away.”
Cabraal said, “This is the first time that we are entrusting a special minister to the functioning of capital markets. The government is keen that these markets are robust. We have begun to understand how important it is to have capital if it is that we are to grow. We have always had a dearth of capital.”
Cabraal was speaking to investors on September 2 at a forum on ‘Restoring Financial Strength for Capital Markets’.
When the current government last had power the GDP value of the economy was at US$ 79 billion and the capital markets were at US$ 25 billion. The government at the time planned by 2020 to make the market capitalisation closer to US$ 100 billion by 2020 and the GDP value of the economy to US$ 150 billion.
“Unfortunately that did not go through. Now when we come back and when we take stock, we find that the economy has grown to US$ 85 billion which is a growth of US$ 5 billion over the past five years. It seems quite low and the per capita income has actually reduced last year. We have a platform which is somewhat dismal.”
The low base figure for growth shall make it easier for the current government to post impressive figures in the future. The lack of capital has been identified by the president as a growth constraint.
The freedom of movement of capital was cited as being important to building investor confidence among foreign participants.
Cabraal said, “no one invests into a country when the people of that country are not investing.” He called on for the creation of better institutions for venture capital.
Cabraal on government involvement in venture capital added: “the government should not get involved,” and criticised the debt management of the country and called for better management of public debt. He suggested that the government debt yields would reduce significantly. Sri Lanka is expected to diversify its debt instruments by currency and to extend the tenure of issuances.