Millennium Development Goals can be acheived

Government should bring down budget deficit:

Charumini DE SILVA

The Millennium Development Goals (MDGs) can be achieved by 2015 as the economy is poised with confidence. In achieving the aims short-term management of the economy is crucial in creating an environment for long-term investment, Institute of Policy Studies of Sri Lanka Executive Director, Dr. Saman Kelegama said.

“To create the atmosphere to achieve these targets will be a challenge. There are four key challenges, to stabilize the macroeconomic environment, remove barriers and improving the environment for doing business, initiating selective economic reforms and to create the proper regulatory framework for private investments.

The country’s economy has been growing at an average of five percent during the first two and half decades under the open economy and now it has averaged to around six percent during 2005 to 2008 periods.

However, Sri Lanka’s actual potential growth rate is above eight percent.

Dr. Kelegama speaking on the theme of Achieving eight percent growth rate of Mahinda Chinthana: Constrains and Challenges recently said the economic growth in 2010 will be six to seven percent and to achieve this growth in a sustainable manner and to move a higher growth future Sri Lanka should bring down the budget deficit and create a stable macroeconomic environment.

These steps could be accompanied by implementing the required institutional and regulatory measures to gear the economy to be more competitive to face the challenges of the modern world.

The challenges have to be met head on to make use of this historic opportunity, Dr. Kelegama said.

The most realistic option in achieving the MDGs is to increase investment up to 32 percent of GDP and bring down Incremental Capital Output Ratio (ICOR) to four percent to achieve the eight percent growth rate.

It is better than aiming for 40 percent of Gross Domestic Production (GDP) investment under ICOR of 5 percent.

At present the investments are 25 percent of GDP with 18 percent of it has been contributed by the private sector.

To accomplish the eight percent growth rate in the next six years is mainly by investment-led growth, but when investments are slow to pick up, the Government will not hesitate to generate consumption-led growth to activate investments in the economy, he said.

The Government policy direction Mahinda Chinthana Idiri Dakma is a mixed economy model, which has a twin engine of growth (public and private sectors). Strengthening the domestic economy by building up the production base for both export promotion and import substitution is essential.

Creating five hubs such as knowledge, ports, aviation, energy, and commerce and finance is important to have a better connectivity with the other countries.

Increasing employment and reducing poverty will bring development to the provinces by making provincial competition.

Dr. Kelegama said the services sector rapidly picking up especially key sectors such as tourism, shipping and retail trade.

Infrastructure projects are moving forward with an investment of US$ six billion. Credit to the private sector booming and the share market performs extremely well. Overall, the economy is steadily growing from all aspects and it is in the right track to achieve the targets by 2015.