CB Chief says economy in auto-pilot mode to reach $ 4,000 per capita income by 2016

Saturday, 10 November 2012 00:40 -     - {{hitsCtrl.values.hits}}

By David Ebert

Central Bank of Sri Lanka Governor Ajith Nivard Cabraal expressed optimism over Budget 2013 yesterday, at a seminar on Budget proposals organised by BDO Partners Chartered Accountants at the Institute of Chartered Accountants Sri Lanka Auditorium in Colombo.

Delivering the keynote address to a packed house consisting of the island’s top accountancy professionals, Cabraal insisted that the 2013 Budget was formulated specifically at achieving the country’s per capita income goal of $ 4,000 in the long-term, as well as creating a 100 billion dollar economy.



He said: “When the ‘Mahinda Chinthana’ policy was formulated and the President enunciated it, we had a lot of difficulty talking about a $ 4,000 per capita income in 2005 because at that time the per capita income was just over $ 1,000.”

“If you think about the background of the past seven years, we have consistently stuck to that target and worked towards it, so much so that last year the country’s per capita income reached $ 2,836 and the economy became a $ 59 billion economy from just $ 24 billion five years ago and today people are seriously talking about a $ 100 billion economy,” he added.

Governor Cabraal stated that a level of consistency has been maintained this time around, in comparison to the previous year’s Budget, with no major changes due to the Government’s long-term economic policy plans.

“Last year the Government took a clear decision that we would make the adjustments that are needed in order to take the country forward and that we would maintain a consistent policy throughout,” he revealed.

Cabraal said that the Central Bank has tracked the economic progress of all the countries in the world and 103 countries have already reached a per capita income level of US$ 4,000, and looking at the trend lines of the growth of those countries prior to reaching the $ 4,000 mark and after, there is a massive change with a steeper curve going beyond that mark.

He added: “I think of it as a point at which the pilot can put the plane into auto pilot and move with a lot more confidence and a lot more thrust beyond that level. So that take-off point is important, which is why many policies have been fashioned to take us there, and today if you look at the Budget proposals that the President enunciated yesterday, you would find that he is thinking beyond that level.”

Cabraal went on to add that many of the Government’s policies included this time around were designed with a firm focus on developing the SME sector through the various tax breaks, concessions, and improved overseas borrowing facilities, with the Government prepared to underwrite any possible exchange fluctuations as well.

In addition, the Governor stated that the other measures included in the Budget aimed at larger corporates, such as tax concessions for companies floating a 20% share on the stock market, relaxed exchange control for larger corporate foreign borrowing up to $ 250 million, and the removal of withholding tax for bond market investors, would foster a much more vibrant investor environment, thereby driving the economy towards the targeted goals.

Meanwhile, responding to a query regarding the novel racing car duty reduction included in this year’s Budget, Governor Cabraal stated that the measure was introduced in order to promote a sports economy emulating a country such as Australia.

“If you look at the world today, you’ll find that sports plays a major role in almost every economy. Take Australia, they host the Melbourne Cup, they host the Boxing Day cricket tests, they have the best tennis tournaments, they also have Formula One – and this is a country of only 20 million people. I think it is necessary for us to now move to a level where we will also encourage these worldwide events.”

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