‘Country on track to achieving per capita income of US$ 4,000 by 2016’

Sri Lanka’s macroeconomic fundamentals have improved over the last couple of years, while moving in the right direction.

As a result, the country is well on track to achieving its target of doubling the per capita income to US $ 4,000 by 2016, Central Bank Governor, Ajith Nivard Cabraal said, when he unveiled the Road Map for Monetary and Financial Sector Policies for 2013 and Beyond.

The Central Bank is now focusing on preparing for the post US$ 4,000 era by ensuring that Sri Lanka progresses along a steady growth path by carefully planning a second wave of growth to avoid the “middle-income trap.” The key strategy identified to avoid such an outcome is to encourage greater diversification of the economy.

In this regard, the Central Bank expects the “5+1 Hub” concept, envisaged in the Mahinda Chintana policy document, would provide the necessary footing for the economy to pursue this strategy.

Towards this end, the Central Bank’s medium term macroeconomic framework has been carefully prepared to foster the expected growth path, while giving priority to ensuring that inflation is maintained at mid-single digits in the next five years.

Continued strong commitment towards fiscal consolidation by the Government, is expected to have brought down the overall fiscal deficit from 6.9 per cent of GDP in 2011, mainly due to the expenditure containment.

However, the Government maintained public investments at a level sufficient to sustain the high growth momentum of the economy by supporting the infrastructure drive. Public debt has been managed prudently and the Debt to GDP ratio is estimated to be 81 per cent in 2012, in comparison to 78.5 per cent of GDP in 2011, mainly due to the one-off increase on account of the depreciation of the rupee.

Nevertheless, the fact that risk indicators of Sri Lankan public debt have improved at a time where global risk had been rising, iscommendable. Despite challenges and shocks to the economy, Sri Lanka’s financial system has maintained stability, while expanding.

The Banking sector stability and strength remained unaffected, while performance of financial institutions improved, efficiency of the payment and settlement systems increased and regulations strengthened and streamlined further during the year to promote the stability of Sri Lanka’s financial system.