Sri Lanka moving towards truly liberalised economy, removing controls

Time has come for Sri Lanka’s private sector to change their attitude of depending on state concessions and protection to make a tradable economy as the government is committed to liberalise the economy removing excessive controls.

This was the strong message conveyed to the public at the inaugural ‘Breakfast Buzz’ hosted by the American Chamber of Commerce (AMCHAM) in Sri Lanka on Thursday.

It was organised as a part of a larger series with the aim of bringing together policymakers and private sector stakeholders for greater collaboration and understanding, in their shared effort to expand the Sri Lankan economy.

Finance and Mass Media Minister Mangala Samaraweera who was the chief guest at the event told the gathering that Sri Lanka will look to build competitiveness by liberalising the economy where there is excessive controls and costs.

He said the Government will also be investing heavily in training and skills development and will work closely with the private sector in building the relevant skills.

Addressing the panel discussion at the forum, Senior Adviser to the Ministry of Finance Mano Tittawella noted Sri Lanka’s private sector is depending on incentives and protections granted by the Government.

Most of businessmen were ready to invest depending on the tax holidays offered to them by the Government.

He added that protection should not be at the expense of the consumers. He appealed to the private sector to manage businesses without these protections for the benefit of Sri Lankans.

Mr. Tittawella disclosed that the 2019 budget would present an industry-wide roadmap and it is essential for all successive governments to stick to this plan.

AMCHAM Sri Lanka President Michael Koest said: “The aim of the Breakfast Buzz series is to create a platform where policymakers can partner with businesses and have open conversations to build sound and balanced policies.”

The Government’s damage control measures during the past two months to rebuild the economy following the 52-day political impasse have begun to bear fruit, Minister Samaraweera emphasised.

A rules- based economic framework is now being implemented creating confidence in the sustainability of the policy outlook.

The Inland Revenue Act for instance is an important piece of legislation that reduces individual discretion and builds in predictability. The same applies to a market-based fuel pricing mechanism. “We will explore similar practices in other areas that help instill certainty and predictability,” he said.

Since the reinstatement of the UNF government on December 17 the country’s external borrowing costs have declined by over 200 basis points – assuming US$ 3 billion in fresh borrowings this year, which translates into a saving of over Rs. 10.8 billion.

Foreign capital is now flowing back into the economy with Rs. 8 billion inflows into government securities since January – and the rupee has also appreciated 2.3 percent year to date, he revealed.

With a view of overcoming the economic crisis situation, the government had to follow three major economic policy priorities, he disclosed.

Those policy measures are ensuring continued access to global capital markets at an affordable rate to enable Sri Lanka to re- finance external debt this year, uplift economic growth through Enterprise Sri Lanka and Gamperaliya, and continue the reform programme to build competitiveness of the economy, he pointed out.

A lot of work has been done to ensure the first priority, he said pointing out that a key element of this would be the continuation of the IMF programme which will signal to markets Sri Lanka’s continued commitment to disciplined, rules-based economic management.

The IMF staff mission was in Colombo this week continuing negotiations with officials of the Treasury and Central Bank.