Sri Lanka must raise tax revenue, manage pressure on rupee: World Bank
ECONOMYNEXT – Managing pressure on the rupee and raising revenue to reduce the 2015 fiscal deficit are Sri Lanka’s immediate challenges, the World Bank has said in a new report on South Asia’s economic prospects.
“Structural challenges include increasing fiscal revenue and narrowing a persistent current account deficit linked to structural competitiveness issues in the export sector,” the bank said in its latest twice-a-year South Asia Economic Focus report.
Another challenge is that access to cheap funds is dwindling with the country approaching upper middle income status, so borrowing terms are seen as becoming more commercial, which could affect affordability.
That means with limited national savings compared to national investment, Sri Lanka needs to attract Foreign Direct Investment, the report said.
To sustain its high growth path Sri Lanka needs to increase growth in the manufacturing and export sectors, it said.
The World Bank forecast Sri Lanka’s growth will increase to 5.6 percent in 2016 due to higher public sector wages and higher disposable incomes.
But it warned that the looser fiscal stance behind this strong domestic demand is also putting pressure on the external balance.
“Maintaining the growth momentum will require higher tax revenue, rationalized public spending and greater competitiveness.” (Colombo/October 05 2015)