The World Bank says Sri Lanka must manage pressure on its currency and raise revenue to reduce its fiscal deficit, in a new report on South Asia.
“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 bi-annual South Asia Economic Focus report.
The report further said 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 means with its limited national savings compared to national investment, Sri Lanka needs to attract Foreign Direct Investment.
The World Bank forecast that Sri Lanka’s growth will increase to 5.6 percent in 2016 due to higher public sector wages and higher disposable incomes, but 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,” it said.
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