Lanka’s growth solid in region
Private sector investment picking up:
Sanjeevi JAYASURIYA
There was broad based economic rebound in 2010 in all three sectors
and Sri Lanka recorded solid growth compared to the region. The robust
growth will be moderating this year, Institute of Policy Studies
Director Dr. Dushni Weerakoon said.
The global economic recovery assisted Sri Lanka and the strong growth
recovery in exports, remittances and tourism contributed towards
significant growth, she said at the launch of ESCAP Economic and Social
Survey of Asia and the Pacific 2011 yesterday.
ESCAP Economic Affairs Officer Dr Muhammed Hussain Malik,
Institute of Policy Studies Director Dr Dushni Weerakoon,
Central Bank former Deputy Governor Dr W.A. Wijewardena and
United Nations Information Centre Director Douglas Keh were
present. Picture by Nissanka Wijeratne |
She emphasized on sustaining dynamism and inclusive development
through connectivity in the region and productive capacity in least
developed countries.
Export earnings grew by 17.2 percent, remittances by 23.6 percent and
tourism by 64.6 percent. This enabled the off setting of higher import
expenditure. There was a moderate inflationary environment in 2010
recording an annual rate of 5.9 percent.
The healthy foreign reserve position of overall US $ 6.6 billion saw
nominal rate appreciation in the exchange rate by three percent to
support six months of imports.
“Though, there were potential risks to macroeconomic stability the
growth momentum was driven by the higher level of public investment.
However, the weaker private sector investment is picking up,” she said.
The credit growth was slow to pick up and there was a sharp recovery
in credit growth in the private sector. The easing of monetary policy
has created a conducive environment.
However Dr. Weerakoon cautioned that there is a threat of building
inflationary pressure in 2011. There are signs of cost-push inflation
rising due to the increase in food and oil prices.
There is excess rupee liquidity in the Sri Lankan economy. This hurts
exports, but helps external debt servicing.
The Central Bank needs to use regulatory measures to take off excess
liquidity out of the system. The Central Bank intervened to mop up
foreign currency by expansion of domestic monetary base. The country’s
fiscal situation improved in 2010 due to sharper cuts in spending and
efforts to raise tax revenue. The borrowings to finance infrastructure
can be justified as higher growth can raise revenue to pay debt.
The composition of borrowings has changed rapidly and foreign
borrowings being the dominant source where there is an increase in
non-concessionary and commercial borrowings.
The country needs to look at broad based reforms to improve
productivity and sustain growth momentum. “It needs to encourage more
FDIs and introduce complementing reforms in the areas of labour market,
education and the public sector to help fiscal consolidation,” Dr.
Weerakoon said. |