Economy records huge progress under President Rajapaksa:

Significant increase in expatriate worker remittance:

Economy on a steady path

Macroeconomic stability, key to business and investment confidence:

Unemployment rate drops from 8.3 percent to 4.4:

By Lalin Fernandopulle

More ships berthed at the Magampura Mahinda Rajapaksa port

During the nine years under President Mahinda Rajapaksa, the Sri Lankan economy has achieved unprecedented progress and the country has transformed from developing country status to middle income country.

From 2015 onwards the government has laid the foundation for the next phase of development to transform the economy to upper middle income country and in the long run to achieve developed country status by 2035.

There was a clear path in this journey. The first priority of the government was achieving peace and it was achieved in 2009 and secondly development of infrastructure and it too has been significantly achieved. If you take any sector, ports, highways, electricity, telecommunication or any sector, today they have developed to the highest levels in our history providing the environment for private sector investment. Macroeconomic stability is the key to build business and investment confidence. Until the defeat of terrorism in 2009, governments in power did not have control over the economy. Frequent attacks on key economic slots created panic in the business community.

Changes

Foreign investors were in a dilemma and FDI inflow dropped significantly. Economic growth was low and it was a minus in 2003. Average GDP growth rate during this period was around five percent.

If we compare statistics of 2004 and 2013 these changes in the economy over the past nine years can be seen.

In 2004, GDP growth rate was 5 percent and it increased gradually and by 2013 it recorded 7 percent. High and volatile inflation was another issue that made business decisions more difficult. By 2004 annual the average inflation rate was over 9 percent and it has now come down to around 5 percent and is at a relatively stable position. Interest rates which was around 20-22 percent has come down to 6-7 percent encouraging private sector investment. The exchange rate stabilisation is another achievement during the period.

The unemployment rate has declined from 8.3 percent in 2004 to 4,4percent in 2013 while the labour force participation has increased from 48 percent to 54 percent.

Impressive

There is structural change in the economy during this period and the industrial sector has grown while the share of agriculture and service have declined slightly. The agriculture sector share has declined from 12.5 percent to 10.8 percent, industrial sector share increased from 28.6 percent to 32.5 percent while service sector share of the GDP declined from 58.8 percent to 56.8 percent.

Sectoral growth too are impressive and especially in the agriculture sector growth rates have increased. Agricultural sector growth rate at -0.3 percent in 2004 has increased to 4.7 percent by 2013. Sri Lanka became self sufficient in rice and maize during this period while exports in tea, rubber and coconuts increased in quantity as well as in price.

Earnings from tourism has increased from $ 417 million in 2004 to $ 1,707 million in 2013 and the growth momentum continues. Government has a target of 1.5 million tourists this year.

Worker remittance from expatriate Sri Lankans too has increased significantly with government intervention to expand the sector by exploiting new markets such as Korea, Malaysia and Israel. Foreign Remittance increased from $1,564 million in 2004 to $ 6,407 in 2013.

These foreign exchange earnings has great contribution in filling the balance of payment of the country and the BOP position of the country improved from $205 million deficit in 2004 to $985 million surplus in 2013.

Macroeconomic stability

The government was committed to maintain a low budget deficit which is crucial to maintain macroeconomic stability and international financial agencies such as IMF and World Bank too are keen. The budget deficit declined gradually from 8.2 percent in 2004 to 5.9 percent in 1013.

One major allegation against the government is borrowing heavily from international sources and increasing debt burden. The government has to invest in mega infrastructure projects which the private sector is reluctant to invest in, such as ports, roads and railway lines.

The source of these investments are mostly on borrowing. However, government debt is not at an alarming level and in terms of the percentage of the GDP government debt has declined. The government's foreign debts as a percentage of GDP has declined from 47.6 in 2004 to 34.1 in 2013. The benefits of this economic development has passed to the vast majority of the people despite there is an increasing inequality in the income distribution. Poverty level has declined significantly and there is a growing middle class in the country. There are several indicators that prove this scenario.

Expansion of the financial sector, especially the banking and insurance sectors is one example. From 2004 to 1013 branch network of domestic commercial banks has expanded from 1,056 to 2,576 branches. Number of foreign bank branches has increased from 33 to 221 and the number of specialised bank branches has increased from 178 to 390. Regional Development bank branch network has expanded from 197 to 255 during this period.

The ATM network of the banks expanded from 1876 ATMs in 2004 to 2310 ATMs in 2013. New branches opened in the North and East provinces is one reason for this huge expansion on one hand in addition to improved economic activities all over the country.

Credit card usage increased from 491,196 to 951,320 during this nine years period. All these factors are evidences for increased income and domestic consumption.

Vehicle stock of the country increased from 2,297,711 to 5,203,678 and increase of the cars, motorcycles and three wheelers indicate the growth of the middle class while the increase of the stock of buses shows the development in the public transport system.

Access to basic infrastructure too has increased significantly during this period. Access to electricity increased from 73 percent of the population to 96 percent, access to safe drinking water increased from 73 percent to 88 percent. Mobile phone usage increased from 2,211,000 to 20,315,000 and internet subscription increased from 93,000 to 2,012,000 during this nine years period. These figures are the witness of changed socio economic status of the people in this country during this nine years period under the President Mahinda Rajapaksa's leadership.