Sunday Nov 24, 2024
Sunday Nov 24, 2024
Wednesday, 10 September 2014 00:00 - - {{hitsCtrl.values.hits}}
begin by tracing the last eight years if our history, because I feel it was a very interesting period where we moved and transited from a conflict-driven country to a stable political and socially stable country, which has been an extraordinary movement considering the challenges that we faced.
If you look at the real sector of the country, you will see that the GDP sector has been strong and the growth has been about 7.5% on average, which has been extraordinary growth momentum. Unemployment has come down, inflation has been in mid-single digits in the past 66 months, then in the external sector we see the current account deficit coming down, tourist arrivals has been very strong.
Tourism trajectory
In 1982, just prior to the conflict, Sri Lanka had 500,000 tourists visiting the country and at that time Thailand had one million, double what we had. In the year that we ended the conflict in 2009, Sri Lanka had 400,000 tourists and Thailand had 20 million – you can see what we had missed out on. But that does not worry us too much because we know the capacity that we have.
The trajectory has been very strong and we have the potential to have 1.6 million tourists by the end of the year. By 2016 we will have about 2.5 million tourists visiting Sri Lanka and about 4.4 million in 2020 – these are not just numbers; we are working towards these goals with a sense of eagerness and with the infrastructure being developed accordingly.
FDI inflows have been strong, just in 2000 we had only about $ 200 million coming into the country, but today we have $ 2 billion coming into the country each year and probably increasing as we go on. Our gross official reserves have remained strong, it is in the region of about $ 9 billion now, and the exchange rate has been pretty stable.
Since our liberalisation in 1977, Sri Lanka has followed the traditional IMF prescriptions, where we used to be told ‘if you depreciate the currency all will be well,’ and we depreciated at 9.9% from 1977 up until 2005. We thereafter changed that and brought in a new type of economic management and from the year 2006 to 2012, it has only depreciated by 3.3%; one-third of what we had had in the past in that period of time. This year we have seen a gentle appreciation of the currency and we are not too eager to make it too expensive for people.
Fiscal consolidation
The fiscal consolidation has helped a great deal. The Government has helped us to manage inflation, so we cannot take credit for it ourselves. We have been able to bring down the fiscal deficit as well as the public debt. In 2002, Sri Lanka had a debt to GDP ratio of 105% and in 2005 at the time that this administration took office, it was as high as 91% and today it is down to 74% by the end of this year and we will hit 65% by the end of 2016. This too has not been a process that was too fast but a gentle reduction to take it forward on the same sustainable lines.
We are working to maintain a high growth and low inflation trajectory and we are very keen to ensure that this continues. This is an important facet of economic management because it gives us the intention as well as the purpose to go towards that level of high growth and low inflation. It was earlier mentioned that when governments stay in power for too long, they get complacent; but it is important to also note the method in which governments are attacking these issues. Therefore, in the recent past the Government, along with the Central Bank and other economic planners, has been focused on delivering the numbers.
During the last few years we have been able to turn Sri Lanka into a virtuous cycle and this is an important element for economic stability. Very often if you get into a vicious cycle; it is very difficult for you to get out of it. What was needed for Sri Lanka in 2006 and 2007 was to break free from this vicious cycle and get into a new cycle, which is a helpful cycle. Because once you get into it, it helps you to keep going on the same basis. Each of the items in a virtuous cycle, from low inflation to real interest rates to enhanced savings to a regular pipe-line of investments, sustained growth leading to low debt levels, leading to low fiscal deficits, once again leading to low inflation, is a good cycle to be in and that is what we are very keen to do.
By 2015 we can move to $ 4,000 per-capita income, one year earlier than we intended to. We started talking about per capita income of $ 4,000, when our per capita income was only at $ 1,200. We wanted to leapfrog and go to the next phase and we succeeded in doing that.
Plans for 2020
Now let me spend a few minutes on our plans for 2020, we will target a GDP of around $ 150 billion, a per capita of more than $ 7,500 and to achieve that we will need to have economic growth at around 8%, inflation at current levels, poverty to reduce to low levels of around the less than 1% mark, we are looking at a debt to GDP level around the 50% mark, current account to be at surplus and the Sri Lankan Rupee to be at a slightly higher level, but not to be too expensive for people.
We are looking at a highly-developed business outlook, making sure that our ratings are improved on a consistent basis and ensuring that the lagging behind of the other districts, to ensure that those areas that were under conflict for 30 years today will not be recognised, since all reconstruction efforts have been completed.
We will have a shift in the real economy where the areas that were thus far not in our lexicon coming in. particularly the five hubs; we realised that we need to do something different, because many countries have been in the middle-income trap. Therefore in 2010 we identified five key hub areas that we would develop; maritime, taking advantage of the location of the country, aviation again taking advantage of the location of the country, knowledge hub where we would train our young people, today you will be surprised to know that the London Stock Exchange is powered out of Colombo.
The energy sector, Sri Lanka today is searching for oil, there have been very impressive accounts of what we have in store and a commercial hub – today if you go to Sri Lanka you will see that the roads are improving and we have a new Sri Lanka. By seeing these areas of focus change and improve we will see this paradigm shift in the real economy.
