Feb 11, 2020 (LBO) – A revival in economic activity can be expected in 2020 with the support of better fiscal and monetary measures with Sri Lanka also looking at a fresh deal with the IMF, a senior official said.
Speaking at the Ceylon Chamber of Commerce’s Economic Outlook launch for 2020 the Central Bank Governor Prof W D Lakshman says low inflation, lending rates together with exchange rate stability, improved consumer and investor sentiment will keep the island’s economy in check in the medium- term.
Sri Lanka’s foreign capital flows, portfolio, and direct investment are expected to grow while workers’ remittances are expected to remain more or less stable without making significant gains, he said.
“The major ongoing policy reform in my view is the dependence placed on a coalition of three known forms of capital formation in growth which include domestic private capital, domestic state capital and foreign private capital.”
Answering questions regarding the IMF stimulus programms the Governor noted that Sri Lanka has not ruled out any further discussions.
“The IMF said Sri Lanka was going to post stronger growth in 2020 and we should not treat them as our enemy,”
“As a member state we have rights.”
The idea we have is to have talks with them later on and develop a program within the kind of policy framework we agree, as long as that is permitted, he added.
IMF staff concluding a visit to Sri Lanka in February said that the country’s primary deficit could widen further to 1.9 percent of GDP in 2020, due to newly implemented tax cuts and exemptions, clearance of domestic arrears, and backloaded capital spending from 2019.
The mission reminded that fiscal prudence remains critical to support macro-economic stability and market confidence, amid high levels of debt and refinancing needs.
Ambitious structural and institutional reforms are needed to anchor policy priorities, bolster competitiveness and foster inclusive growth in Sri Lanka, they added.