Sri Lanka has made significant progress in its socio-economic and human development indicators. Its social indicators rank among the highest in South Asia and compared favourably with those in middle-income countries, the World Bank report on ‘Sri Lanka Development Update with a special focus on ‘Demographic Change in Sri Lanka’ states.It notes that economic growth has translated into shared prosperity with the national poverty headcount ratio declining from 15.3 percent in 2006/07 to 4.1 percent in 2016.
Extreme poverty is rare and concentrated in some geographical pockets; however, a relatively large share of the population subsists on slightly more than the poverty line.The country was ranked 76th in the Human Development Index in 2018. At the launch of the report, Vice President South Asia Region, World Bank, Dr. Hartwig Schafer said Sri Lanka’s health care ranks top among its regional peers, but more needs to be done on human capital development in the country.“Sri Lanka’s income levels have increased from around US$ 890 to over $ 4,000 to be an upper middle income country.
The country has also done well in improving its ease of doing business ranking under the reform agenda,” Dr. Schafer said. However, the World Bank notes that Sri Lanka has failed to sustain the post war economic growth momentum which has slowed down in the recent years despite its skilled work force.
The report states that following 30 years of civil war that ended in 2009, Sri Lanka’s economy grew at an average 5.8 percent during the period of 2010-2017, reflecting a peace dividend and a determined policy thrust towards reconstruction and growth; although there were some signs of a slowdown in the last few years.
“Sri Lanka should be able to achieve a GDP growth rate of around 6-7 percent with its skilled work force. The question is why is it not moving in that direction,” Dr. Schafer questioned. According to the Bank, the economy is expected to rebound from a low base and move towards four percent in the medium term driven by domestic demand.
Inflation will stabilize around mid-single digit level, although pass-through of currency depreciation and fuel prices would exert upward pressure.
The report also notes that Sri Lanka faces a number of challenges to sustain future economic growth, create more and better jobs and reduce poverty; which must be addressed through determined reforms such as staying on the fiscal consolidation path and creating fiscal space for health, education, social protection, public investments in infrastructure and others, improving competitiveness and promoting trade and FDI to facilitate a shift in the growth model driven more by private investment and exports, making progress in governance reforms such as Right to Information, the Audit Act and the Public Finance Act and State owned enterprise reforms.
“The global environment remains turbulent. Gradually tightening financial market conditions are exerting pressure, as Sri Lanka is preparing to rollover its maturing debt, which will be at a historical high between 2019-2023. External risks include disappointing growth in key countries that generate foreign exchange inflows to Sri Lanka: exports, tourism, remittances, FDI, and other financing flows.
“South Asia is the most vulnerable region to climate change. Around 80 percent of the cities in the region are flood prone. A couple of years ago Colombo experienced severe floods. Sri Lanka needs to focus on a multi dimensional poverty alleviation approach through access to quality education and healthcare,” the report states.
Dr. Schafer said that the government should remain focused on fiscal reforms and driving private sector investments in to labour intensive sectors.
He said the World Bank will continue to assist Sri Lanka in infrastructure development, improving the capital market and reducing the cost of borrowing.
