International Monetary Fund (IMF) resident representative Koshy Mathai reiterated the need to attract Foreign Direct Investment (FDI) to the country in order to continue the growth path Sri Lanka has set herself with the end of the 30-year long conflict.
“Sri Lanka has to attract more FDI’s because apart from its extolled virtues, it also brings in the new technologies and know-how to the country,” he said, while calling the country to focus on exports to emerging economies such as China.
Sri Lanka was not able to attract the amount of FDIs as it would have liked in 2012 and according to Board of Investment (BOI), the country achieved US $ 1.3 billion in FDIs, falling short of the US $ 1.75 target set. BOI expects to attract US $ 2 billion FDIs in 2013.
Speaking at the Annual General meeting of the Sri Lanka Chamber of the Pharmaceutical Industry, Mathai further noted that Sri Lanka has to reverse the current trend in exports.
“We have always focused on the EU and the US, but its time now to focus on emerging markets such as Chin, the ASEAN and India. Since the late 90’s, exports have dropped from 30 percent to 17 percent and this trend must be reversed,” he said.
Sri Lanka’s trade gap widened 19.2 percent Year-On-Year (YoY) in the month of April to US $ 825.4 million amid a fall in export earnings and a reversal of subdued import expenditure in the first three months of the year.
The export earnings during April fell 6.87 percent YoY to US $ 696.6 million with all three export categories reporting YoY declines in earnings. Meanwhile, the cumulative export earnings in the first four months of 2013 dropped 7.8 percent to US $ 3 billion.
Mathai went on to state that despite Sri Lanka doing well to curb inflation and control its foreign reserves, the country has to focus on increasing revenue.
“The tax revenue relative to the GDP is 11 percent and that is a very low figure” he said and called for the Inland Revenue Department to focus on collecting more taxes in order increase revenue. “You can’t starve the beast owing to discrepancies. Revenues must increase for further growth” he quipped.
Matahi also commended the Central Bank’s decision to remove the fixed exchange rate policy permitting the rupee to fluctuate according to its true value.