Expressway system from Hambantota to Kandy-PM
View(s):A well-planned expressway system from Hambantota to Kandy, joint ventures for Hambantota Port and Mattala Airport and development of the Kandy City with the Japanese government, were some of the plans of the Government explained on Friday by Prime Minister Ranil Wickremesinghe.
Prime Minister
These measures were spelt out by the PM in an “Economic Policy Statement” presented to Parliament.
The following are extracts from the PM’s statement:
“The challenge faced by us today is to sustain what we have built, and strengthen the economy. This task has two prongs. The first is to stabilise the economy creating a country free of debt for our future generations. The second is to expand the economy giving all Sri Lankans the chance for prosperity.
We inherited a plagued economy. Since 2015, our Government took a number of major steps to stabilise the economy. As I mentioned in the Economic Policy Statement last year, there is no use of holding the past responsible. We should try our best to go forward getting the past faults rectified.
Perhaps the most important thing is the change of our focus than the statistics. We focussed on a development based on tradable goods rather than developing on non-tradable goods.
We inherited the challenge of high debt with deficits in our current account balance and the government budget. Years of low government revenue paired with rigid expenditure flows led to financing the budget deficit from domestic and foreign borrowings.
In 2015, 90.6 per cent of the Government total revenue was spent for debt servicing. This amounted to 80 per cent in 2016. It is an urgent need to draw our attention on spending more than the revenue. We have initiated a process of fiscal consolidation based on revenue generation by passing the Inland Revenue Act, which is already yielding returns.
The domestic debt portfolio mainly consists of Treasury Bonds. We have to pay US$1.5 billion in 2019 for maturities of International Sovereign Bonds. Further we have to pay annually thereafter. When considering the public debt service payments based on the outstanding debt as at end of August 2017, we have to pay Rs. 1,974 billion in 2018 and Rs. 1,515 billion in 2019. It means we have to pay more than Rs. 3,489 billion in 2018 and 2019 for debt servicing.
In order to overcome these unprecedented challenges, the government has initiated a prudent debt management strategy. Our traditional approaches to debt management will have to change to cope with new risks and structural and regulatory changes.
Inflation
Our government is taking a two-pronged approach to address the price stability. We expect to provide the opportunity of buying the food items at a lower price throughout the year in order to control the short-term price fluctuations resulting in hardships to the people. We will improve the domestic supply chains and distribution networks to do so. In the meantime, we will allow importing of food products and other essential commodities at reasonable costs within the competitive market framework. We have reduced taxes on food commodities substantially over the past three months. We urge domestic wholesalers and retailers to pass the benefit of these reductions to the consumers.
Our ambition is to make Sri Lanka a prosperous country by 2025. For this vision to become a reality, our activities should join hands with the external world. Sri Lanka is a small island right in the middle of a large world. For thousands of years we have benefitted from being located strategically. Unfortunately, we seem to have forgotten this competitive advantage of the location. Our vision is to reclaim that mantle of international connectivity. We have to leave behind the decades of inward-looking policies that shrouded our capacity to grow.
For this vision to become a reality, we must encourage the entrepreneurs to diversify our exports. From that, our export basket will be improved with diversity. For decades, we have relied on the same export products such as garments, rubber, and tea. These have been the giants of our exports economy. But now, we should diversify our exports by adding value added goods and services.
3-year target
To kick-start the transformation, we will implement a comprehensive economic strategy over the next three years.
We intend to raise per capita income to $5000 per year.
We hope to create one million new jobs.
Our target is to increase foreign direct investment to $5 billion per year.
We plan to double the exports to $20 billion per year.
The Government will encourage the private sector to develop the skills of the market by investing on skills development and joining hands with the public – private sector initiatives. Recent estimates show that 23 per cent of the population will be elderly by 2042. With the rapid increase of the aged population, skill development programmes will also target older workers.
Trade
Sri Lanka’s exports are still based on traditional plantation crops together with apparels and tourism. We still compete for apparel with lower income economies resulting in pressure to keep our wages low. Still our biggest foreign exchange earner is foreign employment sector. Yet all these foreign exchange earnings are insufficient to meet our import bills. This lack of export growth contributes to the pressure on the balance of payments. This results in the depreciation of rupee and affects the prices of goods.
We should now focus on adopting an export-led economical growth strategies and policies by providing high-value and diversified products and services.
A key part of this policy will be entering into Free Trade Agreements with partner countries around the world. We are making great progress towards mutually beneficial Free Trade Agreements with Singapore, China, and India. These deals will give our economy a massive boost by opening huge new markets to our entrepreneurs.
In the coming years, we will strengthen the tourism sector so that we can work towards attracting five million tourists to Sri Lanka every year.
Massive resort hotels dominated our tourism sector in the past. But current research shows that 90 per cent of Sri Lanka’s hotels have less than 10 rooms. This is an Airbnb economy. This is an economy where every individual with a spare room has the capacity to earn cash. We will streamline the informal sector and ensure the quality and standards.
SMEs
Another key feature of our support for the small businessman is the Swashakthi loan scheme. The government launched Swashakthi with the intention of supporting small and medium scale entrepreneurs to start self-employment projects and industries to strengthen the village economy. We have seen high demand for this scheme. That means we have deep wells of entrepreneurial capacity just waiting to be tapped. We will extend this scheme further to support the entrepreneurial skills and ideas of the youth.
We are in the process of launching several new schemes to support technology based SMEs. We urge financial institutions to keep intermediation costs low, so that the whole country can benefit from reasonable interest rates on loans.
Women
We aim to create an environment where all citizens have the opportunity to achieve higher incomes and better standards of living. Therefore one of our main priorities is creating safe working conditions for women.
We should improve the public transport systems enabling women to travel comfortably to their workplaces. We are introducing the Light Rail Transit (LRT) with this purpose. This will greatly ease the current passenger congestion and provide a convenient and a safe mode of transport.
Archaic labour laws which restrict females from effectively participating in the labour force, contribute to lower participation and lower productivity levels. Therefore, the government is committed to introduce new legislation. The present situation in the private sector on maternity benefits and access to tertiary and vocational education facilities will be improved.”