Long term planning, reforms essential for Sri Lanka’s economic development

The signing of agreements with bilateral creditors would lead to the disbursement of committed JICA loans but a consistent, long-term development plan and structural reforms were vital for the turnaround of the country’s economy.

This was opined by Chief Representative, Sri Lanka Office of the Japan International Cooperation Agency Tetsuya Yamada at a seminar on “Local and Global Economic Snapshot with Strategic Priorities Impact on Development Policies of Sri Lanka”, organized by the Development Policies, Strategies and Development Finance Committee of the Organisation of Professional Associations.

There were 11 ongoing projects, which were suspended following the country defaulting on foreign debt in April 2022. However, he stressed the importance of macroeconomic, social and political stability, infrastructure development and structural reform in achieving recovery and development.

Describing JICA’s operations in Sri Lanka, he said that they had assisted Sri Lanka with numerous grants and loans. In fact, they were Sri Lanka’s biggest donor after China. A consistent long-term plan and improved governance were also essential. Furthermore, the decision-making process must be systematic, data-driven and transparent.

He underscored the importance of transforming to a digital and green economy in order to achieve sustained economic growth.

Acting Chief Executive Officer, Hatton National Bank, Damith Pallewatte, observed that there had been a positive increase in the GDP in the first quarter of this year, with the expectation that there would be a growth of 3 – 4% this year. Consequently, the expectation was that Sri Lanka was on its way to a growth trajectory.

“While many believe that low interest rates are good, there were more savers than borrowers in the country. Furthermore, any business could make profits as a result of low interest, without there being any differentiation in terms of quality and efficiency.”

However, he stated that there were also significant challenges. “The poverty rate, which was 11% 5 years ago, stood at 26% at present. Beyond urban centers, there is little sign of economic progress. Typically, a drop in interest rates results in an increase in the stock market but our stock market is currently struggling.”

He observed that agriculture was cultivated on over half the country’s land, but contributed only 6.7 % to the GDP, which was indicative of how inefficient many of the country’s sectors were.

Pallewatte also said that Port City was very important in attracting investments while various investment zones were being created throughout the country.

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