Prospects for development of Sri Lanka’s capital markets in a Fed-exit world
Friday, 16 August 2013 00:00
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In an attempt to present views from a macro and corporate perspective, a panel discussion on the prospects for development of Sri Lanka’s capital markets took place at the roundtable.
The discussion, at which John Keells Holdings Director and Economist Dr. Indrajit Coomaraswamy was moderator, had four other speakers. Expressing views on this regard was Central Bank Deputy Governor Dr. Nandalal Weerasinghe, International Monetary Fund Resident Representative Dr. Koshy Mathai, Carson Cumberbatch Director Chandima Gunawardena and Fitch Ratings Head of Sovereign Ratings Asia Pacific Andrew Colquhoun.
Acknowledging statements made during the presentations of the roundtable, Weerasinghe expressed the country too is not satisfied with the current FDI levels. “Based on recent experiences, it can be said that foreign investors are highly cautious with their approach. We certainly have made progress in this area but the levels are unsatisfactory,” he said.
The Governor stated during his keynote that rating agencies should take into account other factors to its rating grid and Weerasinghe opined that this is absolutely correct and pointed out two additional areas. According to him, agencies should consider a longer period of the country’s performance and situation while comparisons on performance should also be made with peer countries on the extent of progress achieved.
“The IMF has been quite positive about Sri Lanka over the last few years and we will continue to hold the view that things are not that bad here,” IMF’s Dr. Mathai said. He pointed out that improvements have been observed in the inflation rates and fiscal deficit but advised to keep a close eye on the external debt.
“While the overall picture looks all right, the 80% credit ratio is too high, and this should be watched closely. However, what Sri Lanka has in favour are its debt dynamics. With regard to the debt to GDP ratio, the leverage is coming about slowly but there is a tendency for it to come down and this will help Sri Lanka greatly,” he added.
A perspective from the private sector was given by Gunawardena from Carson Cumberbatch. Questioning if ratings are exploited enough by the private sector, he opined that the positive environment in which businesses are operating gives enough room to do so. “If we are on positive footing, we can make the most of the resources available to benefit both the economy and the companies we represent, but if on negative footing, we will certainly not be able to exploit this in a way that is advantageous for all,” said Gunawardena.
