The Sri Lanka Economic Association concluded its 2013-Annual Sessions  on 25th &26th October 2013 at Centre for Banking Studies, Central Bank of Sri Lanka, Rajagiriya. The main theme for 2013 Annual Sessions was THE WAY FORWARD FOR SUSTAINED GROWTH.

Our high growth rates of over 8% in 2010 and 2011 fell to 6.4% last year and projections for this year by the IMF and the international financial institutions are also low although the official projection by the Central Bank is 7.5% growth. The growth rate came down in 2012 because the previous high growth rates were achieved at the expense of growing macro-economic imbalances which required corrective action which in turn led to reduced growth. We need to manage the balance of payments while promoting growth. This requires reduction of the budget deficit and the public debt, particularly the foreign debt as the foreign debt service charge is too high. Monetary policy must be appropriate to keep inflation under control and attract foreign capital inflows to fund any resultant deficit in the balance of payments.

Economic theory distinguishes between short term growth and long term sustainable growth. Short term growth is achieved by greater utilization of labor and capital increasing output per worker.   But our labor surplus is largely eliminated and unemployment is below 4%.  So we now have a constant labor force. In the Solow growth model economic growth requires an increase in the output per worker. In the absence of technological change and innovation, applying more capital to labor results in diminishing returns to labor and output per worker will grow at a slower rate implying lower growth. The challenge then is to introduce new technology and increase capital through greater savings so as to increase productivity per worker.

We need to introduce new technology, go in for more innovation, save and invest more.  Since our domestic savings rate is low we need to attract more direct foreign investment to sustain the required rate of investment for higher growth.

We need to create the necessary environment to increase direct foreign investment, to promote greater capital accumulation and to adopt new technology.

Speakers presented their papers at the Annual Sessions on the following sub-themes.

1. Narrowing the Public Sector Debt
2. Management of the Balance of Payments
3. Appropriate Monetary Policies
4. Productivity Enhancement
5. Creating an Enabling Environment to attract Direct Foreign Investment and Innovative Technology