COLOMBO
Interview/ Anil Jayantha Fernando, minister of labour and deputy minister for economic development
Sri Lanka has restored economic stability, recording steady growth and investor confidence, yet challenges remain, says Deputy Minister for Economic Development Anil Jayantha Fernando in an exclusive interview. Foreign reserves have risen and inflation has eased, while industrial growth has reached nearly 10 per cent. Fernando, however, says lasting prosperity depends on continued reforms, new investments and stronger export markets. Edited excerpts:
Q/Where does Sri Lanka stand in terms of economic development now?
A/ I would not claim that we have achieved major economic development. We continue to face several challenges. The reciprocal tariff issue with the United States remains unresolved. However, we have been able to stabilise the economy in terms of pricing and financial discipline. This has helped build investor confidence and boost investments. Government revenue is on target, and we are aiming for exponential growth. We are working within the IMF framework. There are constraints, but within them, we have achieved GDP growth of 5 per cent compared with the forecast of 3 to 3.5 per cent last year.
Growth in the industrial sector has reached 9.7 per cent. We have not seen volatility in interest rates or financial markets. There has been no instability in capital market operations, although politically motivated resistance exists to bring the market down. We have also maintained the exchange rate at around LKR 300 against the dollar. That stability shows Sri Lanka is investor-friendly. Our foreign exchange reserves have risen to $6.1 billion, close to the $7 billion target for the end of the year. The economy is now stable, but to achieve sustained growth we need more investment, and negotiations with investors are ongoing.
Q/What are your next steps to ensure growth, particularly regarding land, agriculture and export policy reforms?
A/ We are focusing on medium-term strategies for developing modern agriculture. Current agricultural output is inadequate, and land availability is limited. We are mapping land, preparing a utilisation policy to ensure that it is used for economic development. Another priority is value-added production and manufacturing in sectors linked to our mineral resources. We are also expanding the IT sector by drawing on our skilled workforce. For the first time, we have a separate ministry for the digital economy. Logistics and trade are being developed through better use of seaports and airports. Our aim is to expand exports and diversify products to create more opportunities in the global supply chain.
Q/What investments are you looking for from India?
A/ India can invest in our transport sector. We want to move beyond traditional transport and prioritise electrification, which is part of our long-term plan. Robust infrastructure is essential for development, and transport is key. When road, rail and air transport improve, all other sectors benefit. Poor transport infrastructure has affected agriculture, particularly harvest distribution and packaging. Indian investment is already there in a cold storage project in Dambulla. There is also huge potential in the energy sector, especially in wind and renewable energy. These are major areas in which India can participate.
Q/What has changed since Prime Minister Narendra Modi’s visit to Sri Lanka?
A/ Our policy is to build strong, resilient and vibrant trade and investment relationships. Compared with the previous government, which was linked to corruption and underhand deals, there has been a clear change. We are cautious about free trade agreements, but the public trusts and supports us because people know we are working in their interest. Our goal is national prosperity. In discussions with Prime Minister Modi, we spoke about opportunities, particularly in the tourism sector. We are now open to new investments.
Q/How do you plan to deal with US tariffs?
A/ Our strategy is to amicably expand market access with other countries without harming our industrial sector. This approach has already helped reduce tariffs from 40 per cent to 20 per cent, and talks are continuing. We are pursuing diversification to create new opportunities in the global supply chain, while protecting key sectors such as garments, rubber and agriculture. New markets are being explored in sub-Saharan Africa and Europe. The United Kingdom has introduced the Developing Countries Trading Scheme, which allows Sri Lanka to export garments at zero duty.
In the past, trade agreements sometimes failed because of our poor human rights record linked to war and terrorism. To address this, we plan to abolish the Prevention of Terrorism Act, reform the online safety bill and strengthen human rights protections. These steps will open new opportunities, particularly in Europe. We also believe that there will be major prospects in the Middle East and India through vibrant trade agreements.