The Asian Development Bank (ADB) on Wednesday described Sri Lanka's economy as "remarkable" but warned increases in government revenue, attention to law and order as well as reform in state-owned enterprises are crucial to become an upper middle income country.
On his first ever visit to Sri Lanka, ADB President Takehiko Nakao met Sri Lankan President Mahinda Rajapaksa upon the latter's return from Bolivia on Wednesday morning, as well as several ministers and senior officials, to discuss global, regional and bilateral issues, including challenges and opportunities for the Sri Lankan economy over the short to medium term.
At the meeting with President Rajapaksa, he commended the country's strong economic growth, as well as its ongoing efforts to lift the country into upper middle income status.
"Sri Lanka has achieved remarkable growth and stability. Inflation has been reduced and the exchange rate is stable," he told reporters.
However, going forward, in order to sustain growth, Nakao stressed the importance of maintaining sound macroeconomic policy including the reform of state-owned enterprises and strong investment in physical infrastructure by promoting public-private partnership to mobilize private sector resources.
He also focused on investing in skills development through technical and vocational training, pointing out that while Sri Lanka's investment in infrastructure was a high 6 percent of GDP, investment in healthcare and education needs to be stepped up.
"There are many areas to commend. While Sri Lanka is not a country rich in resources like oil or gas, it's geographical location and human resources gives serious potential to become an upper middle income country," Nakao opined.
ADB forecasts that the Sri Lankan economy will expand 7.5 percent both this year and next, one of the fastest growth rates in the region. But it is still marginally below the Sri Lankan government's expectations of 7.8 percent growth. In 2013 Sri Lanka grew by 7.3 percent.
Sri Lanka joined ADB as a founding member in 1966. As the end of 2013, ADB had approved 176 in government and non-government loans totaling 6.17 billion U.S. dollars for Sri Lanka.
ADB helped finance Sri Lanka's first highway and is in discussions to fund the Colombo-Kandy expressway, Nakao noted. ADB also part financed expansion of the Colombo port with a loan of 300 million U.S. dollars.