PM presents economic policy to Parliament Govt targets private sector involvement

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By 2017-10-21

By Skandha Gunasekara

Presenting the Government's economic policy to Parliament yesterday, Prime Minister Ranil Wickremesinghe said, that it leaned towards the private sector entering industries such as renewable energy and agriculture, while simultaneously striving to free the country of its debt burden.

He noted that one of the most significant changes the incumbent Government took, when compared to the policies of the former regime, was to focus on development through tradeable goods instead of non-tradeable goods and the repayment of foreign debt.

"The challenge faced by us today is to sustain what we have built and strengthening the economy. The first is to stabilize 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 stabilize the economy. There is no use of holding the past responsible. We should try our best to go forward getting the past faults rectified.

"Despite reasons which are beyond our control and challenging domestic and global conditions, we were able to sustain a steady GDP growth rate of 4.4%. We were able to maintain the unemployment rate at 4.2% and to reduce the budget deficit to 5.4%.
"Perhaps the most important thing is the change of our focus than the statistics. We focused on a development based on tradeable goods rather than developing on non-tradeable goods. For years, the growth of the Economy of Sri Lanka was heavily reliant on huge public investments in infrastructure. Only the industries such as construction industry were strengthened by such investments. Concurrently, the exports share of the GDP of Sri Lanka was decreased gradually," he said, while stressing on the need to rid the country of its heavy debt burden.

"Years of government revenue paired with rigid expenditure flows led to financing the budget deficit from domestic and foreign debt borrowings. In 2015, 90.6 per cent of the government's total revenue was spent on debt servicing. This accounted for 80 per cent in 2016. It is an urgent need to draw our attention to 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. Public finances have been strengthened and revenue has increased as a percentage of GDP during the past two years. The ratio of revenue to GDP in 2016 increased to 14.2% from 11.4% in 2014. For the first six months of 2017, revenue to GDP now stands at 6.7% of GDP.

Public finances have been strengthened and revenue has increased as a percentage of GDP during the past two years. The ratio of revenue to GDP in 2016 increased to 14.2% from 11.4% in 2014. For the first six months of 2017, revenue to GDP now stands at 6.7% of GDP from 6% in the corresponding period in 2016. It is expected to reduce the current debt, which is 79.3% of the GDP to 70% of GDP by 2020. We expect to maintain the budget deficit below 3.5% by then. We will strengthen the Fiscal Management Responsibility Act affirming our commitment towards fiscal consolidation, he said


The Prime Minister then emphasized the fact that the agricultural sector required revitalization and the need to build up further Private-Public Partnerships (PPPs).

"We hope to harness the power and energy of PPPs to improve efficiency and productivity of agriculture. The agriculture sector is saddled with major issues such as low productivity, lack of diversification, inefficiency in water management, and poor management of weather disruptions. Weaknesses in the sector contribute to food insecurity and regional poverty. We will revitalize this sector through investments in agricultural research, extension services, water resources, and infrastructure facilities. We will facilitate the shift from traditional low value to modern high value agriculture. We will encourage scientific farming, promote agro-based industries and initiate commercial agriculture with the participation of farmer organizations and the private sector" he said in this regard," he said.

Further, he said a liability management fund and Liability management Bill will be introduced. Also, he stressed that a national housing policy is being drafted.

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."

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