World Bank stresses urgency in expediting Sri Lanka reforms
Sri Lankan Government-led economic reforms to improve competitiveness, maintain macro-fiscal stability and strengthen institutions are being carried out at snail pace owing to difficulties faced in a complex coalition political environment and institutional constraints on policy implementation. This view has been expressed in the new Sri Lanka Development Update (SLDU) report of the World Bank launched in Colombo on Thursday.
Some of the vital reforms including the enactment of the Inland Revenue Bill, implementing the one-stop-shop for FDI, changes to investment and trade, SOE restructuring such as SriLankan Airlines, drafting of a comprehensive public financial management law, and passing of the Audit Bill were lagging behind, the World Bank report disclosed.
Sri Lanka has been growing but the pace could be faster. Not everyone has benefitted from growth. While adverse weather has curbed growth, many opportunities to grow remain. To be internationally renowned, you need to play on an international platform, Idah Z.Pswarayi- Riddihough, World Bank County Director for Sri Lanka and Maldives told reporters during the launch of the report.
Sri Lanka will need to become competitive beyond its borders and improve its trade potential. It needs to invest in skills development she said adding that Sri Lanka has demonstrated it can do all these needed reforms and be world players.
“While robust contributions from construction and financial services sectors are a good sign, Sri Lanka needs to continue to take forward its reform agenda if it is to adequately boost revenues and provide its people with more and better jobs,” she pointed out. The country has attracted a much lower volume of FDI than peer economies, said Ralph Van Doorn, Senior Country Economist when he presented the SLDU report.
“Sri Lanka has an opportunity to move to new sources of growth and jobs by opening up to trade and diversifying its economy,” he added.
He emphasised that moving ahead with measures to increase exports and fiscal revenue should give Sri Lanka the means to improve the lives of the poor and help adjusting the economy.
In addition to building resilience to meet natural disasters, among the report’s recommendations, is the need to raise more revenue while controlling current expenditures to bring public debt to a sustainable path. For Sri Lanka to attain the status of an upper- middle-income country, it will have to bolster its economy’s competitiveness and ability to pursue an export-led growth model.
The island nation gained a few recent landmark achievements, including the passage of the Right to Information Act and the regaining of General System of Preferences Plus (GSP+). The fiscal deficit narrowed to 5.4 per cent of GDP in 2016 from 7.6 per cent in 2015. The real GDP growth for 2016 slowed to 4.4 per cent as sustained drought took a toll on the agriculture sector.
For Sri Lanka to attain the status of an upper-middle-income country, it will have to bolster its economy’s competitiveness and ability to pursue an export-led growth model, Mr. Van Doorn said. The report also highlighted how the construction sector‘s rapid recovery, supported by a strong rebound in investment, was able to offset some of the damage done to the real sector by floods and droughts in recent months.
Cautioning against adopting piecemeal solutions, the report noted that these key challenges are inter-linked and require a comprehensive and coordinated reform approach. Although the island nation must cope with a turbulent external environment and domestic political considerations, a strong political will and the support of the bureaucracy could help advance the reform agenda, the report concludes.