Sri Lanka should be less dependent on foreign borrowings: Central Bank

Apr 17, 2013 (LBO) – Sri Lanka should depend less on foreign capital to bridge a savings investment gap, to make the economy more resilient to external shocks, the Central Bank has said. Sri Lanka had an investment ratio of 30.6 percent of gross domestic product in 2012 but domestic savings were only 17 percent. National savings were higher at 24 percent mostly due to remittance flows.

“We should increase domestic savings,” Central Bank Governor Nivard Cabraal said at the release of the bank’s annual report on the economy for 2012.

“By 2016 we hope to generate resources for investments domestically.”

The Central Bank is projecting investments to rise to 33 percent of GDP by 2016 and domestic savings to 28.4 percent. National savings which include remittances are projected to rise to 34.2 percent.

Sri Lanka has been borrowing heavily abroad in recent years, with the state also borrowing for consumption expenses.

Regulations for borrowing by private firms have also been relaxed by the Central Bank but the monetary authority sounded a note of caution in its 2012 annual report.

“Also, foreign capital may be used to partly bridge the savings-investment gap, yet,