IMF stresses need to grow FDIs
View(s):Sri Lanka should focus on increasing Foreign Direct Investment (FDI) in the face of declining export revenue, an International Monetary Fund (IMF) official said this week.
The country’s exports fell 7.4 percent to US$9.7 billion in 2012 from a year earlier and imports fell 5.8 percent to $19 billion, shrinking the trade gap 4.1 percent to $9.3 billion.
The balance of payments situation was also correcting, though lower imports had put pressure on state finances.
FDIs will bring modern technical knowhow and boost economic activities creating employment opportunities, the IMF resident Koshy Mathai told a media conference in Colombo.
He disclosed that an annual Article IV consultation report on Sri Lanka was submitted to the IMF governing board observing that the country has achieved notable progress on a number of economic fronts over the past few years.
Mr. Mathai noted that Sri Lanka’s tax revenue is the lowest in the region and there is much to be done in streamlining collection and increasing tax base.
The recovery will likely be constrained by the need to continue fiscal consolidation, high inflation, which limits the room for near-term monetary easing, and a continued slow recovery in Sri Lanka’s main trading partners, particularly the US and EU.
Sri Lanka should keep monetary policy on hold for the moment to build on economic stability based on low inflation, he said.
The recent electricity tariff increase would also help reduce losses in state enterprises and it will enable banks to release more financial resources for private sector activity, he said
He disclosed that the Ceylon Electricity Board and Ceylon Petroleum Corporation have incurred heavy losses amounting Rs.150 billion, and therefore it is essential to move toward cost recovery pricing to place them on a sustainable footing. But he said ad-hoc increases were not the solution.(Bandula)
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