Major economic fallout from Easter Sunday attacks and coronavirus
Due to various global and local crises like the coronavirus and the fallout from Easter Sunday incident, Sri Lanka’s economy is at risk, according to Deshal De Mel Independent Director, Sampath Bank and Research Director, Verite Research.
He was delivering the oration at the 18th Annual K Sivagananathan Memorial Awards and oration held this week at the Bank of Ceylon Auditorium conducted jointly by the Association of Professional Bankers of Sri Lanka (APB), the Institute of Bankers of Sri Lanka (IBSL) and the K Sivagananathan Memorial Trust (KSM).
In removing risks to the economy, he said that Sri Lanka has to demonstrate a return to a credible fiscal path before meeting repayments due in 2020 and given the challenges in reducing Government expenditure this necessarily entails shoring up of government revenue.
He said that a fiscal roadmap outlining the path to budget deficits of below 5 per cent in the short to medium term will be necessary to restore confidence of global markets and growth during reforms are required, particularly to address export competitiveness success to end cost of land and labour.
On simulated impact on Sri Lanka’s Balance of Payment – Current Account deficit, Mr. De Mel mentioned that weak fiscal metrics challenge, sustainable debt financing and Sri Lanka’s fiscal deficits are high by global standards resulting in large public debt now dominated by external commercial debt.
He pointed out that fiscal outcomes fundamentally caused by poor government revenue was weak even before the recent tax revisions.
The recently proposed tax revisions will likely have negative revenue impact of between 3 per cent to 4 per cent of GDP (Rs. 450 billion to 600 billion) and there is very limited space for a reduction in government expenditure. He indicated that there is a likelyhood to see the budget deficit rise to 8 per cent of GDP or above in 2020.
This further increases Sri Lanka’s vulnerability and high risk which is evident in international sovereign bonds and asked whether Sri Lanka can grow its way out this risk. Growth is important but revenue is more critical, he indicated.
He said that assuming a 3 per cent of GDP reduction in government revenue in order to achieved in 2018, the national GDP would have to increase.
K.Sivagananathan, an innovative banker, contributed much to uplift and upgrade Sri Lanka’s banking and financial services industry. He also worked tirelessly with the APB and IBSL to improve the standard of education in the field of banking and finance in Sri Lanka to be on par with international standards.
Twenty- six students obtained the highest marks in the Diploma in Applied Banking and Finance (DABF) in the March and September 2019 examinations conducted by the IBSL, and they were awarded cash prizes and certificates.