Oct 08, 2009 (LBO) – Sri Lanka’s private sector is being strangled by a plethora of regulations and corrupt and inefficient bureaucrats and politicians that stifle entrepreneurship, a top company executive has said. The public sector, through the finance ministry and the central bank, have to manage effectively the budget deficit, the money supply, the foreign reserves, the movements in government borrowings, debt servicing and the budget.
“These are all relevant to the private sector when trying to form a view of whether or not the economy is going in the right direction,” de Mel said.
“The credibility of those who manage these institutions is important. If you think they are bullshitters then you don’t believe what they say.”
One of the most visible levers of control of the economy and of the greatest concern are short term rates of interest, de Mel said.
“If the rates of interest are in the 20’s the private sector investor will come to the correct conclusion that you cannot borrow at 20 plus percent and get a return as the investment will have to provide returns greater than 20 percent for the investment to be viable.
“There are not many opportunities to get returns above 20 percent.” S