April private ...

Sri Lanka began the tightening cycle in January 2016 after the increase in the banks’ statutory reserves ratio by 150 basis points followed by three hikes in key policy rates, each time by 50 basis points, to arrest the higher growth in private sector credit and the rising inflation, which caused most of the economic imbalances.

Central Bank Governor Dr. Indrajit Coomaraswamy confided that the trend seen in April was expected to continue towards the remainder of the year and thus the total private sector credit would ease off towards the level desired by the Central Bank.

“A further deceleration in the growth of credit to the private sector is anticipated, given the prevailing high nominal and real lending rates in the market,” the Central Bank said. The bank expects no more than a 15 percent growth in private sector credit for 2017. However, the year-on-year growth in private sector credit is still around 20 percent.

The money supply in the economy measured by the broad money or M2b has increased by a little over 20 percent, considerably higher than what the Central Bank wants.

Meanwhile, independent economists opine that April is traditionally a month with lacklustre demand for credit and hence the current data might not provide a 100 percent true picture of what is to come.

But the Central Bank has vowed to crush the demand for consumption credit as it abandoned the interest rate caps on

“We’ve found that the best path to economic reforms is part test match, part T20. It’s a long game that needs to keep the scoreboard ticking and occasionally, when you have the opportunity, to hit a six,” Australian High Commissioner in Sri Lanka Tim Huggings said.

Speaking at the launch of ‘The Roadmap to Improve the Investment Climate in Sri Lanka’, this week, he said Australia has been batting through a long innings of reforms and economic growth based on transparency, which helped the economy become more competitive, flexible innovative and resilient.

Sri Lanka has lost wickets in droves, since the country has regressed after achieving widespread liberalization starting in 1977. Protectionist lobby groups have helped make Sri Lanka a more inward-oriented economy than four decades ago.

Each election and cabinet appointment cycle also results in the government calling for changes of gloves and bats, lunch breaks and third umpire reviews, with the fall in concentration eventually leading to wickets.

“We all know that economic reform is difficult because every citizen has a stake in the well-being of the economy.

Business people, farmers, teachers, bureaucrats, chefs and street sweepers, each person is affected by economic change in slightly different ways and they all vote. Were it not for politics, reforms would be an easy task,” Huggings said.

He said that the reform process works as incremental radicalism, with each reform making a small difference, but collectively over time creating positive changes in the economy.

“Australia has been on a reform journey for about three decades and it has been by no means a linear path and in no means easy, but the data suggest that the three- decade reform path has been working,” he said.

While noting that no reform journey is the same for each country, the reform agenda, which was presented this week, incorporates some of the best practices from Australia. The World Bank too helped Sri Lanka to formulate the reform process.

Inbound tourism from India grew 2.8 percent YOY to attract 27,826 tourists and 2,035 tourists arrived from Pakistan recording a 39.5 percent increase—both of which were overtaken by negative growths in arrivals from the Maldives and Nepal.

Western European arrivals grew 12.3 percent YOY with 33,228 tourists. The UK was the highest source market from the region with 10,424 tourists, growing at 10.8 percent YOY and sustaining growth recorded throughout the year. Germany however was the biggest driver of growth from the region during June, growing 28.6 percent YOY to 7,024 visitors, after showing worrying signs earlier in the year.

The French market contracted by 8 percent YOY to 3,365 inbound tourists, further consolidating views that the landmark event hosted last year for the French travel trade may not have created much impact for Sri Lanka.

The East Asian market fell 5.7 percent YOY to 28,643 tourist arrivals, with the 13.8 percent contraction in arrivals from the Chinese market, which contributed 17,305 tourists to Sri Lanka tourism in June, suppressing gains from Japan—a market which grew 11.1 percent YOY with 2,970 tourist arrivals—and other countries.

North American arrivals grew 6.4 percent YOY with 8,547 visitors, almost evenly distributed between the US and Canada. Arrivals from Australasia, which is currently experiencing winter and has a large Sri Lankan expatriate community, grew 10.4 percent YOY with 7,093 visitors.

The Middle East market grew 124.3 percent YOY with 4,958 arrivals, despite a majority of the month falling within the Ramazan period. The growth was mainly driven by Saudi Arabia. The Eastern Europe market fell 18.3 percent YOY with 3,865 arrivals, with declines seen across almost all countries, led by Russia, which contributed 1,029 visitors and a negative growth of 36 percent. Just over one million arrivals were recorded for the first six months of 2017, growing just 4.8 percent Yoy—as opposed to the required average growth of 22 percent in order to meet the government projection of 2.5 million tourists for 2017.

Tourist arrivals for the latter half of 2017 would have to grow at a staggering 37.09 percent in order to reach government projections.

The tourism authorities last month said there was no reason to revise its estimates. This was despite mounting evidence to the contrary and the lack of an ongoing tourism promotion campaign. Western Europe remained the largest regional market for the first half of 2017 with 330,334 arrivals, growing 9.1 percent YOY due to a strong performance of the market for the first two months of the year. The UK, the largest single source from Western Europe, grew steadily, while arrivals from Germany and France were low.

The South Asian market contracted 3.7 percent YOY with 232,084 arrivals during the first half, with no growth in arrivals from India, coupled with reduced interest from the Maldives and Nepal contributing to the fall in the figures. East Asian arrivals for the six months increased 6.3 percent YOY to 220,297 tourists, with growth in arrivals from Japan and Indonesia picking up the pace, while Chinese arrivals—which contributed the most to Sri Lanka’s tourism growth last year—grew marginally.