Reforms are the key and is a crucially important base for the countries that are in financial distress to bounce back, said the South East Asian Central Banks Research and Training Center Executive Director, Dr Mangal Goswami.
In the case of a country like Sri Lanka where it involves a ‘financial elementary’, the quantum of debt is quite significant. He opined this at a public lecture held at the Center for Banking Studies, Rajagiriya on the topic, ‘External Sector Issues and Trends in Capital Flows in the Region- A way forward for Sri Lanka’.
“Restructuring the debt in a positive manner is the way forward to revive the economy productively. Growth can only be brought back if the debt is restructured ‘earnestly’. This will also strengthen the repayment capacity.”
‘Global Ratings’ of a country too is defined according to the repayment capacity. “When your repayment capacity is improving significantly it will have a positive effect on the ratings. As a country grows its repayment capacity follows suit. Thus, the way to assess credit rating is based on the country’s repayment capacity.” A fundamental and perfectly executed reform process is also a norm most investors look for.
“If a country wants to attract long-term investors to invest their money in FDIs, reforms must be made in a well-planned manner and should not be driven by an ad hoc manner. Hence, the way of reforms should be consistent. When reforms are executed in a planned and focused manner addressing structural issues and also when there is policy consistency it will create a ‘genuine feeling’ amongst investors that the country indeed is ‘fine to invest”, added Dr. Goswami.
He also said that another factor which would be looked at by investors would be a ‘stable inflation’ which would be low and not volatile to ensure economic growth is sustainable. “If there is no low and stable inflation rate, there will be uncertainty in economic climate, economic management and financial climate.” Another sentiment is price stability and without price stability, it is impossible to have sustainable growth.
