Sri Lanka’s reform progress was “slower than expected,” warned the World Bank’s Sri Lanka Development Update (SLDU) report, published Thursday.
Stressing that “Sri Lanka faces a number of challenges that increasingly put its future economic growth and stability at risk”, the report said "adopting a piece-meal solution to address the challenges is unlikely to be successful."
"A strong political will and support of the bureaucracy could help advancing the reform agenda. Steps are needed to ensure the support of private costs and benefits of the reform agenda.”
Highlighting internal political difficulties in the country the report added, “authorities pursued the economic reform agenda presented in the policy statement of Prime Minister in 2015, albeit at a slower pace, owing to difficulties faced in a complex coalition political environment and institutional constraints on policy implementation.”
The World Bank further stressed that “vital reforms were lagging behind” including “implementing the One-Stop Shop for FDI, reform to the investment climate and trade, and passing of Audit Law.”
The analysis added that "sluggish FDI inflows and debt payment presented a challenging external landscape” for the country, “despite strong tourism receipts and stable remittance inflows.”
The report said that ‘special focus’ on “trade and FDI reforms are needed for sustained economic progress.”
Highlighting that Sri Lanka regained the GSP+ trade tariff despite failing to meet the requirements, the report added,
“Although yet to be in full compliance, the progress made in 2016 helped the country regain concessions under the Generalized System of Preferences Plus (GSP+) from the European Union in May 2017.”
Noting improvements in Sri Lanka’s fiscal deficit which reduced from a reported 7.6% to 5.4%, the World Bank noted “fiscal risks remain high.”
The 38 page World Bank report on Sri Lanka was published on 29th June. See full report here.