‘Biz sector closely monitoring govt. initiatives and prioritizing wealth-creation via capital markets’

By Ifham Nizam

In the wake of Sri Lanka’s economic upheaval, businesses have been watching closely with a view to finding out how government initiatives are shaping the future, Tania Polonnowita Wettimuny, Group Managing Director of IAS Holdings (Pvt) Ltd, told The Island Financial Review. She was speaking on the current economic situation of the country, providing her expert insights into the new governmental policies and their impact on the local business landscape.

Wettimuny added: ‘It is also important to look at wealth- creation through the capital market. Sri Lanka’s capital market is highly undervalued. For example, in India some blue chip companies trade at 40 – 50 times of their earnings in the capital market, whereas Sri Lankan blue chip companies trade at 5 to 8 times of their earnings. If the correct value is created through the capital market, we can easily attract foreign investment into the country.

‘The government’s ongoing negotiations with the IMF are essential in restoring macroeconomic stability.

‘However, the public sector shouldn’t expect salary hikes, tax deductions or benefit increases soon. The IMF program is narrowly focused on stabilizing debt and correcting macroeconomic imbalances, meaning businesses, particularly Small and Medium Enterprises (SMEs), will likely continue to feel the pressure.

‘Until we see a stable government post-parliament dissolution, SMEs will remain a central focus. Yet, the reality is, without low interest rates, investment will be difficult to encourage.

‘With the economy in flux, different sectors may face contrasting fortunes. For now, the focus remains on SMEs, but this could evolve once a stable government is in place. A more pressing issue is the potential rise in interest rates following the debt restructuring, which could further challenge growth.

‘The challenge lies in attracting foreign investment in the short term, given our debt default status. The solution is enhancing productivity and efficiency within the country, particularly among SMEs.

‘It is too early to gauge the readiness of businesses to adapt to new policies. The policies need to be reviewed thoroughly before any concrete conclusions can be drawn. However, the business community remains cautiously optimistic. Even though it is too early to predict, we, the business community, are confident that the government will take the necessary steps to support economic recovery and growth in the upcoming months.

‘While the path ahead may be fraught with challenges, the collaboration between the government and the business sector is essential. By working together, we can build a robust framework that supports sustainable growth and prosperity for all stakeholders involved. The anticipation of these initiatives provides a sense of optimism as we prepare for the future.

‘Sri Lanka needs a robust tax policy to attract Foreign Direct Investment (FDI), a critical component of economic recovery. Tax mechanisms similar to those used in India, Dubai and Singapore, which have been successful in attracting foreign capital are needed.’