Sri Lanka should move from debt finance led growth to export and FDI directed growth: Saman Kelegama

May 22, 2015 (LBO) – Sri Lanka’s economy should move towards export and foreign direct investment led growth, to maintain a sustainable growth, a senior economist said.

“Sri Lanka needs to shift from debt finance investment and consumption led growth to a more export and foreign direct investment led growth,” Saman Kelegama, Executive Director, Institute of Policy Studies said at a recent forum held in Colombo.

“In this respect especially in respect of infrastructure financing, doing that (debt finance investment) has become increasingly difficult.”

Sri Lanka’s foreign direct investment (FDI) was 1,900 million US dollars in 2014 data showed.

The island fell short of the targeted 2.0 billion US dollars FDI’s for 2013 and 2.5 billion US dollars for 2014.

According to investments advisors, Sri Lanka’s policy inconsistency is unhealthy for foreign investments while the mini budget 2015 does not send the right signals to the FDI community either.

Kelegama says we may see the end of global easy money in 2014 with the tapering off of quantitative easing in the US.

“Short-term foreign capital inflows to Treasury bonds and bills cannot be relied upon as an assured source of foreign exchange to boost up reserves in the coming years,”

“This in turn means that international commercial borrowing is going to become costly and Sri Lanka has already seen these tendencies coming into effect.”

(updated)