Tackling challenges through reforms crucial for sustained, equitable growth in Sri Lanka

Jun 28, 2018 (LBO) - The World Bank says that although recent policy measures have contributed to macroeconomic stability in Sri Lanka there are still significant risks stemming from both domestic and external fronts with the balance of risks tilted towards downside. "Sri Lanka faces a number of challenges to sustain future economic growth, create more and better jobs and reduce poverty; which must be addressed through determined reforms," a new World Bank report says. The report recommends four sets of priority reforms: 1. staying on the fiscal consolidation path and creating fiscal space for health, education, social protection and other public investments; 2. improving Sri Lanka’s competitiveness and promoting trade and FDI to facilitate a shift in the growth model driven more by private investment and exports; 3. making progress on and completing the already started governance reforms such as Right to Information, the Audit Act and the Public Finance Act and SOE reforms; and 4. reducing vulnerability and risks in the economy: (a) managing refinancing risks of Eurobonds beyond; (b) improving the debt management function with requisite institutional, legal and strategy frameworks; (c) mitigating the impact of reforms on the poor by replacing untargeted effective subsidies to the non-poor by targeted spending; and (d) enhancing the country’s resilience and disaster preparedness to deal with frequent natural disasters more pro actively. These key challenges are inter-linked and require a comprehensive and coordinated approach, it adds. "Although domestic political considerations and institutional constraints on policy implementation make it challenging, a strong political will and support of the bureaucracy could help advance the reform agenda," "Steps are needed to ensure the support of private sector, civil society and other stakeholders through improved communications on costs and benefits of its Vision 2025 agenda." The report also highlights that Sri Lanka’s employment rate is low given its income level due mainly to low female labor force participation. As the country is ageing, it is important to increase the contribution from women and youth to sustain growth and development. Sri Lanka is also faced with high unemployment among youth. Accordingly, the country needs to create jobs opportunities appropriate for its labor force, in particular for youth and women. The government has set an ambitious target to create 1 million jobs in its Vision 2025. The Special Focus Section of this Edition is devoted to a discussion of issues and priorities in jobs creation in Sri Lanka and the Northern and Eastern Provinces.