The stock market rally can be put into context by analyzing its market capitalizations as percentage and Gross Fixed Capital Formations as a percentage of GDP
The long term Market Capitalization as percentage indicates that that the Global markets as overbought and that a correction is in order.
The previous three occasion were 1997-1999 the Japan Asset bubble in and US banking crisis in trigged the fall. In 2000-2001 it was the US dotcom bubble and finally in 2007-2008 the US mortgage and derivative bubble.
Sri Lanka with its unique blend of diverse culture, bio diversity and friendly people enters the global map as The Best Travel destination and retains its proud identity despite recent setback following 4/21 destruction of life and property. The Lonely Planet – the best-selling magazine featured Sri Lanka in 2019 – 10 years after a sustained upbeat in tourism nearly three decades after ending conflict in 2009.
The country that was torn by war has entertained 2.4 million tourists by the end of 2018 benefiting nearly 300,000 direct and indirect employment and livelihoods,. A large number of them being small and medium entrepreneurs engaged in supply chain activities, investments in the development of leisure facilities, transport and logistics, urban and rural property development. This sector also accounted for USD 4.2 billion in foreign exchange earnings marginally lower than the country’s single largest industrial export income of USD 5.3 billion from textile and garment exports. In 2009, this now buoyant industry accounted for a mere USD 349 million.
The Lonely Planet ranked Sri Lanka as a top country to visit in 2019, stating “Already notable to intrepid travellers for its mix of religions and cultures, its timeless temples, its rich and accessible wildlife, its growing surf scene and its people who defy all odds by their welcome and friendliness after decades of civil conflict, this is a country revived.” The Lonely Planet recognises new highways and railroads help connecting critical areas of the country. It has also recognized that Sri Lanka’s tourism industry is developing properties around the island with more international hospitality brands.
Tourist interest in beaches are expanding to places like Tangalle, and going beyond popular places like Unawatuna and Weligama. Another attraction highlighted in the best-selling Lonely Planet Magazine is the train between Nanuoya and Ella passing through the hill country area beautified with the lavishness of tea plantation and natural environment. The ancient ruins of Anuradhapura with a wider attraction to the sacred Ruwanweliseya Stupa built in 140BC during which time Buddhism had flourished to its peak. The country’s history is enriched with leaders so devoted to empowering the island by Buddhist philosophy and culture with massive stupas and temples.
Economically the culture was supported by agriculture with amazing engineering talents to create its agricultural infrastructure with tanks and canals. The Sacred Temple of the Tooth is the holy place protecting the Tooth Relic of Load Buddha which is another attraction for visiting tourists. Both Anuradhapura and Kandy are two of the most holy places visited by many Sri Lankans as well. Showcasing the cultural extravaganzas every August the Trustees of Tooth of the Temple of the Tooth hold the Kandy Essla Perahera. Peradeniya Botanical Garden – the largest and oldest botanical garden in the country introduces the glamour to make Kandy which has been around for several 100 years as a tourist city.
The Eastern Tourism corridor spanning from Yala to Kuchchaveli through Pasikuda and Arugam bay is well known for the best waves in Sri Lanka. Surfing enthusiasts enjoy this area from April to October.
Ms. Manuels Goretti who has almost 13 years of work experience in the International Monetary Fund currently is a Deputy Division Chief and Asia and Pacific Department and has held this position from February 2018 to date. Prior to this position Ms. Goretti was the Advisor to the 1st Deputy Managing Director for a little over two years.
She has served as Deputy Chief in the office of Risk Management Senior Economist European Department and Economist in Emerging Markets. She has experience in country assignments in Haiti, Romania and Bulgaria, Greece, Turkey, Poland, Peru and Portugal. She led the IMF staff Mission to Sri Lanka in February 14- 28, 2019 to undertake Fifth Review of Extended Fund Facility (EFF) supported Economic Reform Program of Sri Lanka in February 2019.
The IMF mission expressed optimism and predicted that economy is gradually stabilizing, however had to re-calibrate their own projections in two instances on the back of poor economic data and fiscal slippage from its original targets. Economic growth outlook for 2019 is expected to improve to about 3.5 percent from 3 percent in 2018. Inflation has regained in January and is projected to reach 4.5 percent in 2019. The current account deficit widened to 3.2 percent in 2018 but is expected to narrow in 2019 benefiting from the recent exchange rate correction.
The Mission noted that the primary surplus in the Budget in 2018 fell short of the program target due to weak revenue mobilization. The mission further noted foreign exchange reserves target missed by sizable margins.
The staff mission also observed that sustain fiscal consolidation through revenue effort and prudent spending is priority and welcomed government commitment to raise primary fiscal surplus to 1.5 percent of GDP in 2019 and reduce the budget deficit to 3.5 percent of GDP in 2020 and 2 percent of GDP over the medium term by adopting sound fiscal rules and new medium term debt strategies.
The Mission emphasized the need for a concerted effort by all stakeholders to preserve the gains of the economic reform program, support macro-economic stability and strengthen the economic resilience considering the high level of public debt and low international reserve buffers.
The Mission highlighted the need for an improved transparency, accountability and cost efficiently of large state owned enterprises. It also advised government to move forward with plans to bring Sri Lankan Airlines on sound commercial and financial footings and has insisted upon completing energy pricing reforms in order to address fiscal risks.
The staff team endorsed the commitment of the Central Bank to rebuild international reserve buffers and allow exchange rate flexibility. However, rapid slippage in the rupee and cost escalations has pushed the government to reign back the free fall with new fiscal measures on consumer imports.
It advised the Central Bank of Sri Lanka to continue to maintain a prudent and data dependent monetary policy, and stands ready to tighten policy rate inflationary pressures which re-emerged.
The team also emphasized the need for the government’s consistent implementation of the Inland Revenue Act and the modernization of the Inland Revenue and Customs Departments.
The Mission in its deliberation left three messages with the Government
Revenue based fiscal consolidation and state enterprise reforms are needed.
A prudent policy mix and exchange rate flexibility to rebuilt foreign exchange reserves are critical to strengthen resilience and market confidence.
Strengthening institutions and fast tracking structural reforms can lay the foundation for strong sustainable and inclusive growth in Sri Lanka.
The IMF staff mission agreed to the government’s request to extend the EFF arrangement for an additional year to allow more time for the completion of the economic reform agenda. The IMF Board of Directors is expected to consider Sri Lanka’s request favorably in 2019.