To avoid middle income trap: CB’s 10 suggestions

Central Bank Governor Nivard Cabraal yesterday listed 10 key suggestions from the Central Bank if Sri Lanka were to avoid what is called the middle income trap by developing economies.

Sri Lanka finished 2012 with a per capita income of $ 2,923 and is aspiring to reach the figure of $ 4,000 by or before 2016. Noting that the five hub concept + tourism strategy introduced by the ‘Mahinda Chinthana’ would be key to avoiding the middle income trap, Cabraal suggested the following:

1. With external sector becoming more dynamic, active management of foreign currency flows

2. Lowest unemployment rate will pose challenges yet must be maintained or improved

3. Poverty alleviation and inclusive growth has been given priority but this effort needs to improved constantly and consistently

4. Serious commitment by the Government towards sustainable fiscal consolidation must be continued

5. Favourable management of public debt with a target of 65% of GDP by 2016

6. There is greater space for significant improvement in the domestic investment and national savings ratios

7. Developing alternative sources of funding amidst expanding financial sector

8. Greater improvement in labour productivity and innovation

9. Continued focus on massive infrastructure projects to help enhance capacity

10. Further improvements to investor confidence levels