Wish List For Progress

Enhancing Government revenue and curbing expenditure (i.e. reducing the budget deficit), cutting down on waste, stamping out corruption and enforcing law and order and good governance is the way forward for Sri Lanka to enter the rich nation’s club quickly, an economist said.
Former Central Bank of Sri Lanka (C.B.S.L.) Deputy Governor W.A. Wijewardena speaking at a seminar on the “economy” on Wednesday said that such an environment would attract foreign investments.
In the 19th century, when Sri Lanka’s plantation sector economy opened up, Scotchmen investing in this sector, came, carrying bags of coins, he said. There were no electronic money transfer systems operational then, Wijewardena added.
He further said that Sri Lanka’s future lies in the services sector.
Wijewardena also said that the Singapore Government identified that that country’s future lay in genetic engineering, nano technology, I.C.T. and entertainment.
“Sri Lanka must take a cue from Singapore and develop along those lines,” Wijewardena said.
Nearly half of the world’s U.S.$ 77 trillion economy, a figure valued at U.S.$ 33 trillion, comprises the worth of the global entertainment industry, he said.
U.S.A. and U.K. are currently the leaders in those sectors and U.S.A.’s prosperity may be directly linked to its adherence to democracy and openness, said Wijewardena.
Government of Sri Lanka (G.o.S.L.) revenue is eaten-up by public sector salaries and pensions, interest payments on loans taken, and on subsidies, he added.
He therefore called for reforms in those sectors.
Wijewardena also said that government debt which amounted to 85% of g.d.p. should be brought down to manageable levels.
He stressed on the need for a proper evaluation of capital expenditure in order to minimize waste and ensure its relevance to the economy.
The former Central Banker further said that it was important to raise savings from the present level of 17% of g.d.p. to 30% and increase foreign savings to 15%, so that investments may rise to 40% of g.d.p., which in turn would boost economic growth.
To increase savings G.o.S.L. needs to be a saver, Wijewardena said.
For that to happen G.o.S.L.’s recurrent expenditure has to be lower than its revenue, he said.
However G.o.S.L. has been consuming much more than it earns.
He also said that inflation is a disincentive to savings, and emphasized the need to curb inflation.
Sri Lanka has been averaging a 11% inflation level since 1978. He said inflation prior to 1977 was distorted because Sri Lanka was then living in a closed ecnomy era dominated by rationing, controls and shortages.
Wijewardena further said that currently Sri Lanka suffers from both a capital account and current account deficits, leading to a balance of payments deficit.