Ravi Karunanayake, Former Minister of Finance: Interview

Interview: Ravi Karunanayake

What are the national priorities to be reflected in the 2017 federal budget?

RAVI KARUNANAYAKE: We are going to lower the fiscal deficit. We aim to do this by improving tax revenues and increasing compliance. Tax stands at 13.2% of GDP and measures will be taken to increase this figure. We also feel there is a lot to be gained by improving our state-owned enterprises. Through the enhanced performance of these institutions not only will we increase the welfare of our people, but we will also reduce the budgetary deficit. This government also plans to tap into the skills of the youth. It is sad to see that we have a large pool of educated, unemployed youth, who are yet to be utilised for the development of the country. At around 19.7%, youth unemployment stands well above the national average of 4.6%. An effective workforce requires experience, and the youth need to be a part of the workforce if they are to gain that experience.

The government is also looking to improve the balance of payments. To bridge the high trade deficit we have looked to international markets to export our goods. This government’s friendly attitude towards the international community has begun to pay dividends in the form of promising trade negotiations. Opportunities such as the Generalised System of Preferences Plus exist, and we as a nation must fully exploit them. International confidence in our institutions continues to grow, and with it so will the flow of foreign direct investment. Macroeconomic stability is important if we as an economy are to flourish.

What makes you confident about the growth potential of Sri Lanka?

KARUNANAYAKE: South Asia is seeing strong growth, and regional trade and investments have great scope for improvement. Sri Lanka, which has one of the highest rankings for economic freedom in the region, is well placed to receive capital flows. These freedoms are complemented by our growing capacity to trade freely with the rest of the world. Sri Lanka sees itself as part of the global value addition chain. The government sees further growth in tourism, with big international chains opening up properties. Colombo is one of the fastest-growing city destinations in the world, and the megapolis project can only accelerate this growth. Sri Lanka is seen as an exotic and safe destination for international tourists.

How is the government maintaining fiscal discipline in terms of repaying international creditors?

KARUNANAYAKE: Sri Lanka has gone through over three decades of internal strife, which ended in 2009. Even during this period the economy continued to sustain itself, showing tremendous resilience. However, in the subsequent period there was a series of commercial loans secured for non-viable capital investment. These investments have dragged the economy downwards.

The government is currently moving through a consolidation process, maintaining strict fiscal discipline with regards to capital expenditure. State-owned enterprises are being reformed to ensure that they are no longer a burden on the national budget. Revenue collection institutions have been significantly strengthened. Government processes have become more transparent. Government agents have become more accountable.

Further, there are major shifts from commercial loans to more prudent advances through international funding agencies and through bilateral funding arrangements. This helps the government procure funding more suited to the timeframes of the development projects. By selecting more suitable forms of finance and suitable projects, we are ensuring a higher level of growth in our economy and improving our capacity to pay our creditors. International institutions have also continued to show great confidence in the government’s programmes. We look to listen to all stakeholders to have a truly inclusive program of growth.