Apr 11, Colombo: The Sri Lankan economy has seen robust annual growth at 6.4 percent over the course of 2003 to 2012 and last year recorded a 7.3 percent growth.
However, according to a World Bank report, despite some success factors in Sri Lanka's growth compared to regional counterparts, the economy continues to face some structural challenges.
As Sri Lanka is transitioning into an upper middle income country, the key challenges facing Sri Lanka, according to the global lending agency are ensuring that growth is inclusive, realigning public spending and policy with the needs of a middle income country, ensuring appropriate resource allocations for the various tiers of government, and enhancing the role of the private sector, including provision of appropriate incentives for increasing productivity and exports.
Although Sri Lanka has made substantial improvements in education, roads, reintegration of those affected by conflict, and generating income through new livelihoods, Sri Lanka now needs to focus on long-term strategic and structural development challenges.
The World Bank points out that Sri Lanka's tax-to-GDP ratio is declining, reaching a historic low of 11.1 percent in 2013 while the export-to-GDP ratio (excluding services) has declined to a new low of 16.5 percent. This continues to adversely affect both the fiscal and trade balance.
While the overall unemployment rate is at 4 percent, youth unemployment (ages 15-24) is at around 17.3 percent and low female labor force participation at 30 percent do pose a challenge, the agency says in a report.
Although Sri Lanka is on track to meet most of the Millennium Development Goals and identified as an early achiever on 10 of the 21 indicators, the country is, however, making slower progress on the goals related to malnutrition and child mortality.
The global lender supports the Sri Lanka's emerging challenges and needs with a combination of technical support, knowledge products relevant to lending and the use of International Development Agency (IDA) and International Bank for Reconstruction and Development (IBRD) lending.