Sri Lanka’s medium-term economic development is contingent upon the success of reforms designed to reduce stubbornly large fiscal and trade deficits, the recently published Economic and Social Survey for Asia and the Pacific indicated.
The flagship publication of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) which was simultaneously launched in 24 countries indicated that a major headwind to stronger growth prospects would be fiscal tightening that would constrain consumer spending and public investment especially in an environment of higher domestic interest rates.
The report stated: “Public debt currently stands at close to 80 per cent of GDP, with a large share being foreign currency denominated. In this regard, the government has strengthened its fiscal consolidation programme by increasing the value-added tax rate from 11 to 15 per cent and imposing various taxes, such as a capital gains tax and carbon tax for motor vehicles. There are also efforts to tax e-commerce transactions, reform State-owned enterprises and improve tax administration.”
“The main focus on this year’s ESCAP Report is on Governance and Fiscal Management. For Sri Lanka it is of utmost importance that effective fiscal management drives our work. Sri Lanka’s location and external relations stands well in supporting an export-driven economy. It is important that we find financial options that can support the achievement of these goals. This is the main highlight of this year’s ESCAP Report, which makes it a useful tool for policy decision-makers within Sri Lanka and the region,” said Dr. Indrajit Coomaraswamy, the Governor of the Central Bank of Sri Lanka during his keynote address.
The theme for this year’s report is ‘Governance and Fiscal Management’. The UNESCAP Economic and Social Survey of Asia and the Pacific 2017 assesses the region’s economic outlook noting that the pace of economic expansion in the region is modest compared to its recent historical trend and highlights the importance of better governance and effective fiscal management.
The Survey finds that the quality of governance affects development outcomes through its impact on the composition and efficiency of public expenditure. The report further argues that better governance and effective fiscal management in the region not only can improve long-term economic prospects, but also facilitate in grappling with social and environmental concerns.
In Sri Lanka, the survey reports that economic growth moderated to 4.4 per cent in 2016 from 4.8 per cent in 2015 and an average of 7.4 per cent during the period 2010-2014.
The report also shows that economic growth in the country is expected to rebound modestly to 4.8-4.9 per cent in 2017 and 2018.