'Lanka should focus on export-oriented growth'

By Lalin Fernandopulle

Sri Lanka needs to improve its direct public investments to boost economic growth, said International Monetary Fund (IMF) Resident Representative, Dr. Koshy Mathai at the 47th Annual General Meeting of the International Chamber of Commerce (ICC) recently.

IMF Resident Representative, Dr. Koshy Mathai presents a memento to outgoing ICC, Chairman, Tissa Jayaweera.

He said that the country's savings ratio had declined to around 24 percent and added that it should be around 35 percent. Investments from the private and public sectors should be high.

The government should set the right environment for private sector investments. Dr. Mathai commended the single digit inflation ratio maintained by the Central Bank for a considerable period and enabling a flexible exchange rate.

The inflation rate was 6.30 percent last month. From 1986 until 2013, the Sri Lanka Inflation Rate averaged 10.5 percent reaching an all-time high of 28.3 percent in June 2008 and a record low of -0.9 percent in March, 1995.

“There will be good economic outcome by letting the exchange rate move naturally. The Central Bank should maintain a flexible exchange rate for economic stability. Sri Lanka should have the right structure of policies. The government is taking steps to keep fiscal and monetary policy at the appropriate level,” Dr. Mathai said.

The IMF Resident Representative commended the efforts by the government to construct the second international airport in the South, development of the Colombo South harbour and highways across the country which are vital to expedite economic growth.

Dr. Mathai said that Sri Lanka should focus on export-oriented growth by exploring opportunities for export to the region. Sri Lanka exports around 80 percent of its commodities to the US and European markets, five percent to India and one percent to China.

He said trade had declined for a considerable period and added that the drop in exports was due to the high cost of energy and labour.

Exports declined sharply during the past two years due to the drop in global demand triggered by the economic recession. The drop in exports has widened the trade deficit. “Sri Lanka should shift from its traditional Western markets and make inroads into markets in the region. It should focus on its free trade agreements with countries in the region to enhance trade,” he said.

Sri Lanka has bilateral trade agreements with India and Pakistan. Sri Lanka is negotiating with India on the implementation of the Comprehensive Economic Partnership Agreement that would bring about a win-win situation for both countries.