Sri Lanka policy consistency improving; political uncertainty remains: Chamber Chief

ECONOMYNEXT – Sri Lanka economic stabilty and policy consistency has improved from 2017, but business confidence is still lagging amid political uncertainty, the head of Sri Lanka’s largest business chamber said.

“Business confidence has been tepid in the backdrop of political uncertainty,” Ceylon Chamber of Commerce Chairman RajendraTheagarajah said at the organization’s 179th Annual General Meeting Thursday night.

“Macro stability has been achieved to a great extent with higher level of reserves, FDI (foreign direct investment) and exports reaching all-time highs in 2017,” he said.

The government has managed to improve the country’s macroeconomic fundamentals and generated a positive shift in the ‘economic narrative’, he said.

In 2017, the government managed to work towards policy consistency which has been lacking in the past, and the government now has to face the challenge of implementing the policies effectively, he said.

Theagarajah called on the government to continue to build up on its progress in liberalising the economy to focus on trade and investment.

Sri Lanka had chaotic economic policy after a new administration took over in 2015 with an interim budget that hit state finances and ad hoc economic policies, undermining the economic record of Prime Minister Ranil Wickremesinghe’s United National Party, while a massive bond scam also sapped confidence.

After Minister Mangala Samaraweera tool over the Finance portfolio, several key reforms had been done.

A price formula for fuel, which is seen a key reform halt banks borrowings to fill state enterprise losses, which may boost credit growth and central bank accomodation has been implemented.

However several growth promoting reforms proposed in the last budget had been shot down by President Maithripala Sirisena amid heavy lobbying by rent seeking businesses.

President Sirisena’s sudden outbursts against his coalition partner has also increased uncertainty, political analysts say.

Sri Lanka’s economic grwoth has slowed with a stabilization program, after an artificial stimulus had been applied in 2015 and 2016 with money printing. It is usual for growth to fall when foreign reserves are re-collected.

Economists ahve been calling for underlying structural reforms are needed to boost real growth. (Colombo/June31/2018)