Nov 19, 2012 (LBO) – Sri Lanka has shown high debt-backed investment led growth when the rest of the world was slowing but to attract long term “good quality” investors, a better environment is needed, a top World Bank official said. Sri Lanka’s fiscal side was improving with debt levels while falling from high of 100 percent to 80 percent of gross domestic product but was still high compared to East Asia, making the country vulnerable Sri Mulyani Indrawati, a managing director at World Bank said.
Recent growth of around 8.0 percent was partly driven by 30 percent plus investment spending, with state spending largely driven by debt, she said.
If greater “good quality” private investment is attracted Sri Lanka could reduce external vulnerabilities and not be bound by budget constraints, she said.
The starting point was good budgeting and monetary policy followed by addressing structural issues such as skills and law.
“If you are trying o invite good quality private investment it will require a lot of signaling about the kind of investment environment that you are going to provide,” she said.
If what was promised in macro-management was consistently delivered it will improve confidence, she said.