Economists and financial experts from diverse sectors highlighted the need for building consensus at multiple levels on Sri Lanka’s growth strategy and implementing sustainable solutions to the challenges faced by the economy.

Speaking at the forum ‘Sri Lanka Growth Strategy 2022’ organised by NextGenSL and World Bank, recently, World Bank Chief Economist for South Asia Region Hans Timmer, World Bank Country Director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos, former Chairman Ceylon Chamber of Commerce and Senior Vising Fellow at Pathfinder Foundation Rajendra Theagarajah, Economist Dr. Roshan Perera, CEO of People’s Leasing and Finance Shamindra Marcelline and Group Finance Director at Brandix Hasitha Premaratne shared their insights.

“Sri Lanka needs a broad-based dialogue to navigate the current challenges,” World Bank Chief Economist for South Asia Hans Timmer said delivering the keynote address at the event.

Timmer reminded that Sri Lanka faced monumental challenges after the country went into a lockdown in March 2020 with both the manufacturing sector and the service sector suffering its impact. He also pointed out that this led to a huge increase in social protection spending as the government prioritised helping households hit by the economic impact of the pandemic.

The World Bank Chief Economist for South Asia identified the informal sector and the new service segment of the economy as the key drivers of change that will help Sri Lanka realize its true potential.

“Sri Lanka has more opportunities to emerge stronger from the current challenges when compared to other countries in the region. The country can unleash its potential by tapping into the opportunities in the informal sector and in the new service economy,” he explained.

“The informal sector was hit hard in the aftermath of the pandemic and the people involved in the sector became more vulnerable because they were not well integrated into the market. But, it is also important to understand that a ‘crisis’ could also change these dynamics,” Timmer said adding that the rapid development in the digital technology could provide the informal sector with more avenues to access the market.

“Sri Lanka’s new service economy also presents great opportunities. Services are internationally tradable and they push productivity in other sectors. Sri Lanka has greater competitive advantage in the service sector, as the latter is a very strong component of the country’s economy. Also, the percentage of women in the labour force is higher than in many other countries in the region. Nearly 50% of Sri Lanka’s labour force are women,” he explained.

The World Bank Chief Economist for South Asia also commended Sri Lanka’s vaccination drive and said the success the country achieved on the vaccination front could also help its growth trajectory.

Speaking at the panel discussion, former Chairman of the Chamber of Commerce R. Theagarajah stressed the need for finding a lasting solution to ensure debt sustainability.

“If we look at the next 4-5 years, we have to pay USD 4.5 billion annually and it is a challenge we must overcome with sustainable solutions. While the export sector is showing a rebound, the import sector is facing challenges. I am also happy to see that the tourism sector is showing rapid progress presenting opportunities for everyone in the tourism value chain. However, there is a need to build capacity in the tourism sector to ensure continuous growth,” he said. Theagarajah also highlighted value-added ICT solutions as a key driver of Sri Lanka’s growth in the future.

“But, it is critically important to build consensus in the political sphere on the need for structural changes. Without such initiatives, views expressed at economic forums will not result in a major shift on the ground,” he added.

Dr. Roshan Perera, a senior economist with over 20 years of experience in formulating and implementing macroeconomic policies expressed views on broad-basing Sri Lanka’s tax base. “There are two aspects to this. We must first identify the actions that have eroded our tax base in the past and then ‘rationalize’ the tax exemptions granted to various parties.”

“I don’t think a programme designed by the International Monetary Fund (IMF) will be very different to a programme designed by Sri Lankan economists. What is more important here is to understand what needs to be done and to work together to make them happen.”

World Bank Country Director for Maldives, Nepal and Sri Lanka Faris Hadad-Zervos highlighted the importance of a youth-led approach for growth. While commending the progress in the vaccination process, he stated that Sri Lanka must find cost-effective solutions to reverse the ‘damage’ caused by the pandemic. “Focus on productivity, revitalize the private sector and strengthen social welfare schemes,” he said.

“Sri Lanka must have its own narrative and that will shape the country’s growth trajectory,” the Country Director added.

People’s Leasing and Finance CEO Shamindra Marcelline said the role of the state sector should not be undermined in identifying Sri Lanka’s growth prospects. “I believe that the public sector is the engine for growth in Sri Lanka — not the private sector. If you look at it carefully, a number of key sectors such as aviation, ports, education and health are completely dominated by the state. Therefore, increasing efficiency in the state sector will make a massive impact on Sri Lanka’s growth trajectory,” he said.

Brandix Group Finance Director Hasitha Premaratne said that while the pandemic came with multiple challenges, its ‘benefits’ such as the shift towards virtual working environments and the fast tracking of digitalization have opened up new avenues for the private sector. “We must continue this journey, in a sustainable manner, into the future.”

“If the government can support infrastructure development, the private sector is in a position to drive growth,” he said.