Sri Lanka’s potential remains as bright as ever despite some of the dark clouds gathering in the horizon globally, Minister of Finance and Mass Media Mangala Samaraweera said.“While the country is facing a couple of challenging years, the government has managed to build the necessary safeguards to face these challenges in a successive manner,” he told the Sri Lanka Retail Forum 2018 under the theme ‘Towards a Dynamic and Evolving Retail Sector’ in Colombo yesterday.
The Minister added, the future holds tremendous potential as Sri Lanka is at the heart of the fastest growing south East Asian region and the government is putting in place necessary policies to leverage the greater external orientation of the economy. The forum was organized by Sri Lanka Retailers’ Association.
He also reiterated the government’s intention to extend its support to the retail sector and to collaborate with all the stakeholders to make Sri Lanka a major retail destination in the Indian Ocean.He said last couple of years have been challenging for the retail sector, as the economy was subject to exogenous props as well as successive years of drought, persisted during the 2016-17 period had a debilitating effect on the agricultural sector, directly affecting the incomes of the 35% of country’s labour force.
The rising fuel prices have further exaggerated the every government’s expenditure both home and abroad. In spite of these challenges, the government has made a significant progress in stabilizing the economy, Minister said: “By end of last year, the government achieved a primary surplus for the first time since 1950. This trend was witnessed in the first half of this year and we hope to increase this surplus at the end of this year.”
Minister also said Sri Lanka’s reserves are being improved and the monetary sector has also shown signs of stabilising.Despite all these challenges, results of stabilization of the economy are being seen and felt. Citing examples to prove his statement, he said Inflation has fallen to 2.5 in September 2018, compared to 8.6% recorded during the corresponding month in the previous year.
The government economic policy has been to reorient Sri Lanka towards a greater external force, taking on international competition to drive competiveness in the local economy. In 2017, Sri Lanka achieved a record US $ 1.9 Billion in FDI while in the first seven months of 2018 alone; Sri Lanka’s total FDI reached US $ 1.35 billion, indicating a 138% increase year on year.
There is also a positive outlook for exports and FDI in the economy as there are several new projects in the pipeline with investments amounting to billions of dollars.While the external sector is showing signs of progress, he said that the government is equally focused on driving economic activities on the domestic front.Minister also said that the economic growth in 2017 was below potential due to some of the external shocks.
The government has a clear strategy to provide stimulus for the economic growth in a sustainable manner and is providing an impetus to growth through various investment channels.“Recovery in growth that began on the second quarter this year will gather momentum in the coming months and these developments will no doubt have a positive impact on consumption in the economy and on the retail sector in particular,” he said.
He noted further that recent depreciation of Sri Lankan rupee was largely due to external factors and US interest rates hikes, trade wars and rising oil prices have resulted in global investors taking capital out of emerging markets like Sri Lanka.From a policy perspective, the government has taken all the necessary measures to address these factors within our control, he noted.
He added further that government was compelled to take certain measures to stem the importation of small cars under 1000 CC category and said the government has no plans to restrict imports of vehicles in a permanent manner and to go back to the closed economy of 1970.“These are temporarily measures which have been taken and these measures will be reviewed regularly. The government remains committed to rapid liberalization of Sri Lankan economy,” he said.
Commenting on the Enterprise Sri Lanka and Gamperaliya initiatives, Minister Samaraweera said over Rs. 53 billion has been disbursed as Enterprise Sri Lanka loans during the last five months alone, in keeping with the government’s objective of creating 100,000 entrepreneurs during the next year. Minister said Enterprise Sri Lanka initiative would create jobs and provide long term productive capital for aspiring entrepreneurs to set up their own businesses. Accordingly, significant amount of money has been deployed in multiple sectors including Agricultural, Fisheries, Manufacturing, Renewable Energy, IT and tourism and so on.
“The government expects to expand this scheme even further,” the minister said. Under the Gamperaliya Program, another rapid village development scheme, launched to accelerate the rural development, the government has already started work on 45,000 new projects across the country and the government has been providing nearly Rs 20 billion for the work of these projects to be completed by November 30. According to the Minister, Gamperaliya program will also be expanded for the next year and it will generate economic activities in rural geographies, particularly areas badly ravished by the drought, over the last two decades.
“The government is confident that these programs will provide necessary stimulus to spur growth in rural and urban economies alike,” Minister said.