Feb 26, 2016 (LBO) - Sri Lanka is no longer a poor country, and must rely on markets for its funding needs, Central Bank Governor Arjuna Mahendran said. An endorsement of the IMF, in this regard, would be valuable, he added.
"We have had very constructive discussions with the IMF," Mahendran said.
"The government and Finance Minister gave their frank assessment of the economy and the problems they had inherited. And we are now hammering out a way forward in terms of ensuring the economy grows, inflation is contained, and we pay off some of the large debts accumulated over the last 10 years."
An IMF official in Washington said earlier this month an agreement on balance of payments support could be worked out in March or early April.
From his perspective, Mahendran said it is important to have an agreement with the IMF on the way forward, more for the endorsement value of the premier institution on the government's programme.
"We are no longer a poor country. We are no longer eligible for a povery reduction and growth facility like we used to get.
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Now we are a lower middle income country, and therefore we have to depend on the markets."
"We are able to raise all our requirements for the government from the local market. We issue bonds in rupees and dollars without having to depend on aid agencies and such like.
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"Now we are trying to get the IMF to agree with us on our policies, so that we can project to wider investors that we are really adopting the best standards in charting an economic course forward," he added.
Both the government and the IMF is in agreement that fiscal consolidation is a priority. Countries such as Yemen and Georgia have turned around poor revenue collection in a few years, and there was no reason why Sri Lanka cannot do the same, Mahendran said.
Sri Lanka became a middle income nation under the last Rajapakse regime. Unfortunately, due to petty political revenge and maybe due to incompetence, the rapid growth of this economy is now stagnating, under the new Sirisena/Ranil/Chandrika regime. Though already late, it is time to restart all those major infrastructure development projects like the Port City, which have been stopped by the new regime, violating contractual agreements, and costing the nation dearly in paying damages to the contractors, out of funds that could have been used for development.
Wearing fancy suits, sitting in AC rooms looking at fancy colored charts and making mockery by this “alleged” racketeer. ground reality is that still Sri Lankan delicate girls and young women go to work in Arab world to send money to their poor homes….
This is not rocket science-plenty of examples of low income economies growing:
1.Decrease the size of government and spending, including subsisdies
2.removing income tax
3 have a broad-based VAT
4.decrease regulations
5.policies to encourage investment
6.encourage temp. Import of experienced labour, with fixed contracts
When Sri Lanka then Ceylon got their independence from British in 1948 only Japan had more advanced economy and infrastructure in Asia. In other words, we were only second to Japanese by a small statistical margin.
Since 1948 we saw South Korea a country filled with fishermen and farmers living in slums; Singapore a swamp, a marsh, a quagmire with small fishing camps; Malaysia, a palm and rubber estate, growing cocoa as a supplementary income; Taiwan and Hong Kong small coastal areas with fishery as only available means of income, go pass us and became developed or higher middle income countries. And here we are still lagging behind and accusing each other for our shared national misfortune.
Currently I am looking towards Vietnam, which offer much more lucrative and stable Investment opportunities to North Americans who wants to cash in for glitzy frontier market growth. I genuinely fear that Vietnam also will surpass Sri Lanka and become a developed country in our life time may be even sooner than we think.
The Formula for rapid economic growth is well known but rarely used in countries like Sri Lanka, the bottom line is without changing the structure of governance and administration, the economic development will forever be a mirage. Smaller Government and Larger Private/ Citizen participation is the only way our of this long standing misery, abolish Provincial Councils, bring down the number of Members of Parliament, reduce the number of Ministries and Ministers, encourage public/private partnerships, Cut corporate taxes and facilitate more business friendly environment……But first have a political will and ironclad resolution not to allow petty party politics to mess-up everything you have started.
You can not become like other countries you mentioned as long as you are closer to India. Look at all countries around India.
I agree 100% with you on that comment, That’s why I keep saying
“We don’t need a bridge with India, but we want a Wall with India”. Indian interventions in Sri Lanka create political and security issues in unimaginable magnitudes, even today some stupid Sinhalese blame West for LTTE and never understands that India was the culprit responsible for creating LTTE in Sri Lanka.
Latter in his tenure Mahinda Rajapaksha used Chinese as a counterweight to balance the Indian influence but Yahapalana Gang threw that strategy right after they got elected. I’m no fan of Mr. Rajapaksha but I think finally he got it right with India. And unfortunately for Sirisena, he needs top notch educations about foreign policy and strategical maneuvers to understand the danger Sri lanka is in…..