Significant improvement in quality of life - Dr Sarath Amunugama

The economy of Sri Lanka has shown progress in many areas in the recent past. We have been recording 7–8 percent growth in GDP reaching a per capita income of $ 2,836 as at end 2011 which is projected to reach $ 4,000 by 2016. Inflation has reduced to single digits and is currently around seven percent. The Budget deficit has come down to 6.8 percent of GDP while the Debt to GDP ratio has reduced to 78.5 percent.

The social economic indicators which reflect the quality of life has improved significantly with unemployment reducing to 4.2 percent in 2011 and poverty reducing to 8.9 percent.

These figures have improved further in 2012, said Senior Minister of International Monetary Co-operation and Deputy Minister of Finance and Planning, Dr Sarath Amunugama at the Certificate and Diploma Awards Ceremony 2012 of the Capital Market Education and Training (CMET) division, the education and training arm of the Securities and Exchange Commission of Sri Lanka recently.

The capital market is a very important component of the financial sector which supplements the role of the banking system in the economic development of our country.

“At a time we are actively seeking a vibrant capital market in the country it is indeed a pleasure to see more people getting qualified in the field of finance which will directly and indirectly help raise the overall capital market literacy of society,” he said.

“In our overall economic development plan under the Mahinda Chintana – Vision for future we have identified a five-hub model for economic development. We would like to see Sri Lanka evolving as a regional hub for shipping, aviation, commerce, energy and knowledge.”

“In our efforts to develop Sri Lanka as a commercial hub there are many areas that need focus. The capital market development is one of the key challenges in that regard. If the country is to continue its near 8 percent economic growth annually we need a consistent flow of local and foreign investments,” Dr Amunugama said.

A vibrant capital market can facilitate this economic growth by converting savings to investments and also assisting companies to raise funds.

“In reality ours is not a matured capital market yet. The capital market depends heavily on equity contribution at present. The market capitalisation of Colombo Stock Exchange is still below $ 20 b and as percentage it is around 33 percent of the GDP,” he said.

“In a comparable economy we would expect market capitalisation to be at least 70–80 percent of the GDP. Therefore, we have to develop our equity market further.

If we target market capitalisation to be 50 percent of the GDP by 2016 which means we need to envisage the market capitalisation of Colombo Stock Exchange to reach approximately 6.5 trillion by 2016.”

“The capital market of our country has to think beyond just equity. We need to develop our debt market and other financial instruments such as derivatives and futures. We need to look at new concepts such as commodity market development.

To do all these things we need to have a vision and a plan.

The Government has now identified 10 key initiatives which will form the basis of our capital market development roadmap for the next two to three years,” Dr. Amunugama said.

-SJ