Sri Lanka must demonstrate its commitment to good governance and structural reforms which will have effects on future proofing Sri Lankan economy, Former Deputy Governor at Bangko Sentral ng Pilipinas, Dr. Diwa C Guinigundo (Pictured) said.
“It would have something to do with additional reforms or digitalization of the Sri Lankan economy. In addition, climate change has to be incorporated in policy choices.” Dr. Guinigundo told a seminar organized by the Centre for Banking Studies, held under the theme,
He said that green finance should be promoted that should establish Sri Lanka’s reliability to maintain sound macroeconomic stability and inspire greater confidence among foreign and domestic investors.
Meanwhile, Executive Director at The SEACEN Centre stressed the need for Sri Lanka to reduce the footprint of the public sector’s involvement in the economy and increase and incentivize the private sector’s involvement in the economy through various means to spur innovation and productivity.
According to the Annual Report of the Finance, Economic Stabilization and National Policies Ministry, Sri Lanka has more than 1.5 million public sector employees and the size has doubled over the past 15 years. A staggering Rs. 1.1 trillion had been spent on salaries and wages for public servants, including those in the provincial councils, armed forces and police, and pensions of retired public servants, in 2021.
He said further that large-scale policy support to save off COVID pandemic has further increased the debt build up not just in Sri Lanka but in advanced economies, emerging markets and other frontier markets.
“As a result, global debt, even public sector debt, has risen significantly.”
He said further that Sri Lanka, which is dealing with a debt crisis, needs to restore some semblance of macro stability in particular with public policy; notably the financing of the fiscal gap which in most cases is rooted in sustained fiscal imbalances.