Increasing domestic savings vital for development

Sanjeevi Jayasuriya

Domestic savings play a vital role in the country’s economy by providing the investment necessary for development. One of the key indicators of economic development is the amount of money available for investment, Wealth Trust Corporation Executive Director Mangala Boyagoda said.

Ninety percent of the Sri Lankans still believes in the banking system to save. Sri Lanka’s domestic savings is 14 percent whereas in India it is 26 percent, Malaysia 35 percent and Singapore 40 percent.

“It is important to increase domestic savings to achieve a higher GDP growth. Sri Lanka’s percentage of domestic savings is one of the lowest when compared to other countries and we need to encourage people to save. When the domestic savings are low we have to depend on foreign investment for development,” he said.

“There are a number of methods of saving for individuals, corporates and the Government. Returns from investment instruments differ depending on interest rate risk and credit rate risk.

Any investment has a certain amount of risk. When the risk is higher the return would also be higher,” he said. The measurement of the return is the inflation of a country. The saver is at the losing end if the return is lower than the inflation and considered a negative return. This reduces the purchasing power of an individual, he said.

It is time for the savers to think prudently and select their investment options, he said.

“It is necessary to conduct awareness and education programs for the savers to have an informed choice regarding savings. We are traditionally associated with banks for our saving needs and we need to move our savings options to the capital market,” he said.