Sri Lanka should channel capital flows to direct investment: rating official

Sri Lankan President Maithripala Sirisena (L) and Sri Lankan Prime Minister Ranil Wickremasinghe gesture as Sri Lankan Finance Minister Ravi Karunanayake (unseen) presents a supplementary budget to parliament, marking the first economic policy statement of the new government which came to power earlier in the month in Colombo on January 29, 2015. Sri Lanka's new government announced hefty taxes on top companies in a bid to raise revenue, accusing the previous regime of fudging the figures and leaving the economy in a "sad state". AFP PHOTO / Ishara S. KODIKARA (Photo credit should read Ishara S.KODIKARA/AFP/Getty Images)

Nov 18, 2010 (LBO) – Sri Lanka can expect higher post-war growth, with lower inflation, higher employment provided deficit spending can be checked and capital inflows channeled to direct investment, a senior rating official said. “The two key reasons underpinning growth is the return of peace and all that it implies for investor confidence,” Roopa Kudva, South Asia head for Standard & Poors’, a rating agency, told a forum in Colombo.

“And also the expected economic reforms under the IMF (International Monetary Fund) standby agreement are going to be key factor.”

Kudva is also chief executive of CRISIL, an Indian rating agency connected to S&P. She said Sri Lanka’s growth this year would exceed 6.5 percent though official projections are near 8.0 percent.

Kudva said Sri Lanka had favourble demographics. Like India, the dependency ratio has fallen in recent years and unemployment was low at around 5.0 percent. This increased the capacity for domestic consumption.

“It clearly underpins the base for strong domestic consumption which will provide a boost for economic growth.

Fiscal Risk

Sri Lanka could get sustainable high growth if large scale private investment comes and government budgeting im