The International Monetary Fund (IMF) has advised the government to tighten its fiscal policy and reduce budget deficit for the sustenance of economic growth to 8 % of GDP.
The IMF forecasts "strong growth in the coming years” for the economy, saying that "fiscal performance so far remains consistent with the achievement of the government's full-year deficit target of 8 % of GDP, this year and around 6 % next year.
|Guests applaud a speech.
Pic by Gemunu Wellage
Addressing the annual congress of the Sri Lanka Institute of Insurance in Colombo this week, Dr. Koshy Mathai, IMF’s Resident Representative-Sri Lanka and the Maldives, said that the country, which suffered through almost three decades of North East conflict and violence until the government's May 2009 defeat of the LTTE, has clearly rebounded economically, with a peace-induced increase in foreign investment and tourism.
Referring to taxation in Sri Lanka, Dr. Mathai emphasized the urgent need of introducing tax reforms and broad-basing the Board of Investment to take advantage of peace-induced increase in foreign investment and tourism. He advised that Sri Lanka needs to implement fundamental tax reforms; that is to simplify the existing ad hoc tax system, broaden the tax base, spread the tax burden more equitably, and support economic growth, while at the same time boosting the revenue-to-GDP ratio. He also mentioned that Sri Lanka's private-sector investment "will need to play a critical role," in the country's continued growth and stability.
Indrani Sugathadasa, Chairperson of the Insurance Board of Sri Lanka (IBSL) said that Sri Lanka has a big potential in the insurance sector as the macro economic situation in the country has drastically improved. The life insurance sector is expanding rapidly when compared to the general insurance sector, she said. The pension insurance scheme which was recently introduced by insurance companies has been identified as one of the main reasons for the life insurance industry to expand. In addition to that, the general insurance sector will also record a marked growth with the expansion of development activities in the country, she added.
IBSL has introduced a number of initiatives to improve the transparency of insurance company operations and among these the requirements are that all insurance companies will be required to list in the stock market. Delivering the address of welcome, Institute President Deepthi Lokuarachchi said that, around 19 insurance companies and 41 brokering companies compete in the Rs.57 billion insurance market at present, and the market penetration should be increased through creating awareness.
He said that insurance companies need to create awareness among the public and develop the level of confidence in them on the benefits of having an insurance policy. As a result of a lot of new companies entering the market the rates are decreasing and the number of claims is on the rise. These are the main challenges in the insurance industry today and the insurance companies have to be self disciplined and think of the problem practically, he said.