Sri Lanka must curb state consumption, inflate less to raise incomes: economist

Mar 12, 2010 (LBO) – Sri Lanka has to curb excessive state consumption, keep inflation low to encourage private savings, and improve governance to draw foreign capital to promote growth and incomes, a top economist has said. Higher savings were required to increase growth and achieve the targets of replicating the economic success of East Asia’s newly industrialized countries and of doubling per capita income from 2000 US dollars today to 4,000 dollars by 2020.

Holistic Approach

“We can achieve these targets if we have proper fiscal, monetary, external sector and governance policies,” economist W A Wijewardene, a former deputy governor of Sri Lanka’s central bank said told Sri Lanka’s Organization of Professional Associations.

With the population growing an average 1.1 percent a year, to double per capita Gross Domestic Product in 10 years to 4,000 dollars Sri Lanka needs to attain a minimum nine percent average economic growth rate.

To achieve this growth rate investment has to be about 35 percent of GDP.

“The first challenge is to increase our savings ratio,” Wijewardene said. “There are two paths – convert the government to be a saver and encourage private citizens to save much more.”