Sri Lanka needs to move to more private investment, tradable sector-led growth says World Bank
The World Bank’s latest half-yearly flagship report on the country’s economy, future outlook and policy priorities, Sri Lanka Development Update states that to sustain growth, job creation and poverty reduction, Sri Lanka needs to move to a more private investment, tradable sector-led growth model.
It recognises Vision 2025 as a roadmap that outlines such a shift.
According to reports, the update makes a strong case for better risk management which can support Sri Lanka’s transition to this new growth model, which, while opening more opportunities for development and making Sri Lanka more resilient to traditional risks, will also expose it to new ones.
The World Bank states that these risks need to be well managed to maximise the opportunities for households, firms, the public sector and the economy as a whole.
This edition of the World Bank report update focuses on managing risks related to fiscal and trade policy reforms, public debt and contingent liabilities and natural disasters.
While Sri Lanka’s growth, especially in the agriculture sector, was affected by the impact of floods and drought in the first half of 2017, the World Bank projects that Sri Lanka’s economy will recover in the second half and reach 4.6% growth over the full year.
The island nation regained concessions under the Generalized System of Preferences Plus (GSP+) from the European Union in May 2017.
Meanwhile, the Sri Lankan Government is committed to an economic reform agenda, a key highlight of which was the passage of a new Inland Revenue Act in September.
“Sri Lanka’s progression towards Upper-Middle-Income status, as outlined in its ambitious Vision 2025, hinges on the economy’s competitiveness and its ability to pursue an export-led growth model, while ensuring it leaves none of its most vulnerable citizens behind,” World Bank Country Director for Sri Lanka and the Maldives, Idah Pswarayi-Riddihough has said.
According to the update, the new growth model, as captured in the Vision 2025 document, will require a shift from a public investment, non-tradable sector-driven growth model to a private investment, tradable sector-led model; a move that will allow the island nation to benefit from its location close to the largest fast-growing economies in the world.
The update has identified some key reforms required to improve a business-friendly environment and removes barriers to trade such as tariffs and inefficient border clearance procedures among other constraints.
In addition, it lists the drafting of a comprehensive public financial management law, meaningful progress on the debt management agenda and the passage of the Audit Act as priorities that must progress.
“Increasingly, frequent natural disasters also demand more preparedness. It is therefore important to manage risks at different levels,” Ralph Van Doorn, the Senior Country Economist for Sri Lanka and the Maldives and the principal author of the report has said.
“Sri Lanka can become an upper middle-income country by maintaining macro-fiscal stability and increasing its preparedness for natural disasters” says Van Doorn, mapping out the World Bank’s observations on the current state of the economy.
OSL take:
The World Bank’s identification that Sri Lanka needs to move to a more private investment, tradable sector-led growth model in order to sustain growth and increase employment indicates that the government of Sri Lanka will seriously look at the implementation of policies outlined in its Vision 2025 economic policy framework. This in turn would open up a whole gamut of opportunities covering many sectors for businesses of different levels.
Article Code : | VBS/AT/02112017/Z_2 |