Sri Lanka govt borrowing could crowd out pvt sector: World Bank

ECONOMYNEXT – Increased borrowing by Sri Lanka’s government could hurt prospects for investment by the private sector, the World Bank has warned in a new report.

“Large fiscal deficits in Bangladesh and Sri Lanka increase risks that rising government borrowing will crowd out private investment,” the bank said in its report on global economic prospects for 2016.

“In Sri Lanka, external debt has increased since 2014, due to both private and public (mainly non-concessional) borrowing, and government contingent liabilities have also risen fast.”

A growth slowdown increases the risk of deteriorating public debt ratios and rising external costs of borrowing, the World Bank warned.

Global economic growth could be weak this year with a slow down in key economies affecting others, the report said.

Emerging market economies have been an engine of global growth during the 2000s, especially after the 2007-08 global financial crisis.

“However, times are changing,” the World Bank said. “Growth rates in several emerging market economies have been declining since 2010.”

The global economy will need to adapt to a new period of more modest growth in large emerging markets, characterized by lower commodity prices and diminished flows of trade and capital, it said. (Colombo/January 11, 2016)

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