Securities and Exchange Commission Chairman Senior Prof. Hareendra Dissabandara has called on the government to write capital market development into the forthcoming Budget, warning that Sri Lanka cannot reach higher growth by leaning so heavily on government borrowing and bank credit.
He was speaking on Tuesday at an institutional investors forum organised jointly by the SEC and the Colombo Stock Exchange, themed “From Resilience to Sustainable Growth: The Future of Sri Lanka’s Capital Market,” the Daily FT reported.
Recent growth of about 4% to 5% was encouraging given the severity of the crisis, Dissabandara said, but insufficient for the country’s long-term aspirations. Sri Lanka should aim for a sustained 7% to 9%, supported by gains in productivity, competitiveness and investment.
”We cannot simply announce a higher growth target”
“We cannot simply announce a higher growth target and expect the economy to achieve it,” he said. Policymakers must first work out how much additional investment is needed, which sectors it should go to, and how it will be financed — a question he said deserved serious attention from the Finance Ministry, the Central Bank and the corporate sector.
Bank financing has an essential role, particularly for working capital and conventional lending. But long-term productive investment requires long-term instruments, he argued. Since Independence, national financing debate has centred on government borrowing, commercial banking and external debt, while the capital market’s potential has been neither sufficiently recognised nor used. Equity lets businesses raise capital without fixed repayment obligations; corporate debt can supply longer-term funding.
Dissabandara said the SEC and CSE have identified proposals to strengthen the market’s capacity to mobilise investment, and urged policy that encourages companies to raise capital, supports new listings, facilitates new instruments, attracts long-term institutional investors and broadens public participation. Suitable state-owned enterprises could also be considered for capital market participation, he said, where consistent with government policy, commercial viability, public interest and governance.
Investors commit capital on the basis of policy stability, he added, so consistency in economic policy is essential.
He also sought to put the CSE’s recent decline in perspective, attributing it to a mix of domestic and external factors including geopolitical developments in the Middle East and higher international energy prices. The index has since recovered, closing above 20,000 for the first time two days after he spoke.
A separate report presented the following day found the corporate bond market is about 1% of GDP.
Not reported
The filing does not detail the specific SEC-CSE Budget proposals, name the state enterprises under consideration, or give the forum’s attendance.
