Aug 31, 2017 (LBO) – Foreign investor confidence in Sri Lanka has seen a notable increase with a warm response towards government securities, two leading economists from Standard Chartered Bank said.
Relatively high yield coupled with positive fiscal and policy outlook enhance the attractiveness of fixed income Government Securities of Sri Lanka.
Investors are less concerned about sensational political news, David Mann, chief economist, Asia of Standard Chartered Bank said in response to a question posed by LBO.
“Investors are positively disposed towards Sri Lanka due to the gradual progress in fiscal management, particularly in revenue side.”
During the recent past Sri Lanka suffered from poor tax collection, hitting a very low of 12 percent of Gross Domestic Product in 2015, down from 19 percent in early 1990’s.
Mann also commented positively on the success of the ongoing IMF program and demonstrated improvement in government revenue.
“The focus on revenue, instead of curtailing expenditure, is a more positive approach to fiscal management,” he said.
Mann also told LBO that Sri Lanka needs to attract FDI (Foreign Direct Investments) to tradable sectors and export oriented businesses to achieve sustained economic growth.
The FDI flow in the recent past has been mainly towards non-tradeable sectors such as hospitality and infrastructure.
Mann observed that to see an upward trend in FDI, Sri Lanka needs substantial improvements in ease of doing business and tax reforms among the other things.
The enactment of new Inland Revenue Act would be a significant driver of Sri Lanka as an investment destination and Mann adds that he does not expect a noteworthy improvement in FDI flows at least until 2018.
Saurav Anand, Economist, South Asia observed that the Central bank of Sri Lanka will have a managed depreciation of Sri Lankan Rupee. “This will likely eliminate shocks experienced in the past due to sudden depreciation of currency.”
Mann mentioned two possible “Black Swan” events – those occurrences that deviate beyond what is normally expected of a situation and that would be extremely difficult to predict- looming ahead of the global economy; North Korean situation spiraling out of contrail and Chinese economy collapsing.
Such events could pose cataclysmic challenges to the global economy, he said.