July 14, Colombo: A top World Bank official says for Sri Lanka to sustain growth and create jobs in the medium term it will need to shift its growth model towards one more focused on private investment and tradable sectors.
Ralph van Doorn, the Senior Country Economist for Sri Lanka and the Maldives, says with a strengthening global outlook, the restoration of Generalized Scheme of Preferences (GSP+) and the improvement in public finance among other factors, Sri Lanka had been given a clear window of opportunity.
Participating in a TV interview to talk about the recent Sri Lanka Development Update (SLDU) launched in June 2017, the World Bank official said Sri Lanka's economy in 2016, and the first half of 2017 has been broadly satisfactory.
Van Doorn explained that the passing of a Right to Information Act which will improve transparency and accountability and the restoration of the (GSP+), a preferential trade arrangement which will improve exports to the European Union, and VAT reforms which will help strengthen the tax base were the highlights.
Noting that Sri Lanka's outlook had improved thanks to a strengthening global economy, the official clarified that this was subject to the continuation of fiscal consolidation.
He said it was essential that the government take proactive policy measures and remain committed to the reform agenda to protect the economy. While World Bank economists projected a 4.7 growth rate in 2017, that figure did not take into account the impact of the recent floods, he noted.
"We believe that for Sri Lanka to sustain growth and create jobs in the medium term it will need to shift its growth model towards one more focused on private investment and tradable sectors," said Van Doorn.
Reforms would be critical Van Doorn emphasized, adding that the time to undertake these was now.
"In the report we point out four policy recommendations," Van Doorn told the reporter. "The first one is continue on the fiscal consolidation path which means strengthening the revenue base and making the tax system fairer, simpler and more efficient." Other recommendations included that the government align fiscal spending with revenue policies and improve the country's fiscal competitiveness.
The report suggested that way forward for Sri Lanka would be to adopt trade policy with a gradual but firm liberalization schedule and make progress on bilateral trade agreements, while carefully evaluating the costs and benefits to the country. Other focus areas could include trade facilitation and attracting foreign direct investments.
"Improving the business and innovation environment will ensure that firms and non-traditional export sectors can also benefit by the opportunities that are presenting themselves," said Van Doorn, adding that attracting more foreign direct investment could help create jobs, especially for women in a country that could see growth on the back of increased female labor force participation.
Produced every six months, Sri Lanka Development Update provides a more in-depth examination of selected economic and policy issues, and analysis of medium-term development challenges. This edition's special focus has pages dedicated to policy discussions on promoting trade and investment.