Grasping Massive Opportunity: No Place for Complacency

The Challenge: Macroeconomic Stability and Strategic Action
There has been an improvement in macroeconomic conditions since the introduction of the stabilization measures introduced in Feb/March 2012. Inflation has abated and the balance of payments has improved. However, though the growth momentum has picked up in 2H 2012, the balance of probability is that it has been well below the targeted 8%. More fundamentally, the current economic model, where consumption is very dependent on remittances and growth is disproportionately funded by borrowing, including increasing amounts of foreign commercial debt cannot be the basis for placing Sri Lanka on a higher path of sustained growth and development for a decade or more, particularly as international interest rates will rise in the future as the major global central banks unwind their extraordinary liquidity infusion. Despite this, the opportunity now exists to emulate the achievements of the successful countries of East and South East Asia which recorded rapid growth for 10 – 20 years. However, Sri Lanka cannot achieve such success without maintaining macroeconomic stability and taking some key strategic action