Macro fundamentals could moderate attack fallout: Mangala

• Puts confidence in macro fundamentals to see SL through economic repercussions 
• Says will talk to tourism industry to provide support 
• Admits FDI will take a hit but says it will be short term 
  
   

Finance Minister Mangala Samaraweera yesterday put his faith in Sri Lanka’s sound macro fundamentals to offset the economic fallout from the Easter Sunday attacks, but conceded special measures would be needed to support the tourism industry and investor sentiment would be pummelled.  

Speaking in Parliament, Samaraweera touched briefly on the possible economic impact of the Sunday attack but was moderately optimistic of its capacity to recover.  

“It is clear that we had laid a sound foundation for the economy to withstand shocks of the nature that we faced on Sunday. Nonetheless, there will be an impact on the tourism sector even though it is now off-season. Our tourist industry has had long experience of protecting our visitors even through a 30-year war, and there is no doubt the sector will bounce back. We will discuss with the industry to identify further measures to support them through this challenging period,” he said. 

He also opined that investment sentiment, especially for Foreign Direct Investment (FDI), would be hit in the short term but this could be contained if investors were encouraged to look at macroeconomic fundamentals.  

“We could also see some stresses in FDI and portfolio investment in the short term. In both instances, I urge investors to focus on the macroeconomic fundamentals which are, as I have outlined, very sound. Sri Lanka’s investment proposition remains very compelling.”

“Our economy was on a steady path of recovery following a series of natural disasters in the form of droughts and floods in 2016/2017, and a man-made disaster the political crisis of 2018. We had stabilised the economy as inflation was brought down to 2.9% by March 2019, and the trade deficit declined to its lowest level in over five years in February, accordingly the rupee has appreciated by 4.5% – the third best performing currency in the world in 2019.” 

Foreign reserves remain at $ 7.7 billion – covering over four months of import requirements. Interest rates have declined by over 100 basis points this year as fiscal consolidation delivered results with a 0.6% primary budget surplus in 2018, the Minister noted. 

“We have taken pro-active measures to refinance external debt in the first quarter of this year, and have already completed large external debt repayments in January and April.”

Samaraweera, who has championed reconciliation measures within the Government, also emphasised on the importance of dealing with the current situation calmly.   

“We must indeed investigate how and why there was a failure to act on intelligence reports. Why there was a failure to inform churches and hotels in advance that there were reports of plans to carry out attacks. We must investigate why human beings were placed in harm’s way without making even a single attempt to prevent the attacks from being carried out.

“However, it is important that we act with responsibility. It is important to realise that not all problems can be solved with guns and bombs and by changing a few individuals. There is a sense of sophistication that is required to deal with sensitive issues of this nature – countering violent extremism and radicalisation require careful and intelligent approaches.” 

He stressed on the need for transformational reform and development of the security sector, which the Minister said should have been undertaken soon after the end of the conflict in 2009. He recommended the review and rationalisation of major security legislation; review, re-orientation and development of national security and defence sectors; and review, reorientation and development of the public security and law enforcement sector as a way to move forward.