With a domestic
market with a small per capita income of only 20 million customers, Sri Lanka
needs to look ahead of its boundaries and increase its global competitiveness
to sustain fast and long-term growth. To this end, the newly elected government
has set Vision 2025 of Sri Lanka which to set out a reform course to make the
country more competitive and to lift the living standards of all Sri Lankans.
Such changes range from the immediate need to overhaul labour law to reforming
social security network systems and promoting the development and digitisation
of software. Here's how Sri Lanka intends to move towards a more competitive
and inclusive upper-middle-income country and a few macroeconomic targets they
plan to reach during 2020-25:
·
To achieve an average rate of
economic growth of 6.5 per cent or higher.
·
Achieve per capita income over
USD 6500.
·
Maintaing unemployment rate
less than four percent.
·
The rate of annual inflation
not exceeding 5 per cent.
·
Budget deficit at less than four
per cent of GDP
·
A single-digit rate of interest
·
Stabilise the exchange value of
the rupee at a stable level
Macroeconomic
Reforms
The total volume
of foreign loans the present government has raised to achieve various political
objectives, to advance personal agendas, and for day-to-day expenses is equal
to the total foreign investments Sri Lanka has increased from 1948, the year of
independence, to 2014. The debt trap they will thus inherit from the present
regime may compel us to raise foreign loans to an extent just sufficient for
developmental tasks. They will take steps to manage the problems of external
indebtedness through measures such as promoting domestic investments, reducing
import expenditures, and raising export incomes.
New Tax
Policy
The prevailing
tax system has contributed to the collapse of the domestic economy by the entirely
discouraging internal entrepreneur. We would, instead, introduce a tax system
that would help promote products in the country. New tax law will replace the
current Inland Revenue Act. An original taxpayer-friendly simple tax system
will introduce so that it will remain active for several years, without
changing haphazardly and frequently.
A New
System of Banking
To make a rapid
leap forward in economic terms, Sri Lanka ought to develop a reliable
production economy. They will introduce and establish a banking system that
will encourage industrial fields such as import-export trade, construction
industry, small and medium scale enterprises, and agriculture through long-term
loans at concessionary interest rates. This initiative will implement through a
newly established ‘National Development Bank.’
Capital
Market Reforms
The critical
action needed to rejuvenate the Colombo stock market is to regenerate investor
confidence in it. Investors ensured that they have a practical program of work
to achieve this. The operational culture
of the stock market ought to be made more ethical to eliminate the negative
attitudes of the investors and the general public about the stock market. For
this, they will make the regulation by the Securities and Exchange Commission
more effective. We will also take effective legal action against corrupt
practices concerning stock market operations.
OSL Take: The
move by the newly elected government of Sri Lanka to formulate a national
policy on economic development would undoubtedly result in the creation of new
business/investment opportunities as well as contribute to the overall
development of the county’s economy. Sri Lanka is already engaged in an
aggressive development program that covers all vital economic sectors
islandwide. Sri Lanka also has a strong export sector that has been supported
by many trade agreements as well as trade concessions enjoyed by the country
with foreign countries. Therefore, international businesses/investors could
explore business/investment opportunities in Sri Lanka’s industrial sector.
VBS/AT/06122019/Z_TB2
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