Sri Lanka’s investment environment needs diversification to provide better opportunities for both the public and corporations, Governor of the Central Bank of Sri Lanka Dr. Nandalal Weerasinghe stated while addressing the ‘Invest Sri Lanka’ forum held in Colombo today (27).
Highlighting the limited investment options available to the general public within the country, he emphasized the need for expanding capital markets and allowing state-owned enterprises (SOEs) to raise funds through public ownership.
“Many Sri Lankans invest their savings in fixed deposits or banking instruments because there aren’t enough diverse investment opportunities,” the Governor said, adding that “because there is a lack of investment opportunities in diverse instruments, people fall victim to scams, pyramid schemes, and unauthorized financial operations and people lose their money.”
He stressed that relying solely on interest income is not sustainable in the long run, stating “If we look at Sri Lankan investors or the general public, what are the investment opportunities for the general public available in Sri Lanka, still a lot of people, their savings, they invest in fixed deposits or the banking sector. The reason is because they don’t have that much of investment opportunities.”
“This is another important element, for the people to have been offered with opportunity to invest their savings in diverse investment opportunities. The senior citizens, deposit their savings and try to live with the interest income. That is not sustainable.”
“Under this kind of a monetary policy cycle market interest rates cannot be overly high, can never be double digit if we maintain inflation at 5%. We have to have a situation where people get used to relatively low banking interest rates”, he added.
Furthermore, he mentioned: “In this situation, no one will be able to live out of interest income out of their savings, unless they have a huge amount of savings in a bank. This is where it is important to provide this kind of financial instruments.”
According to the CBSL Governor, one solution is strengthening the government securities market and fostering corporate ventures. “Capital markets and regulated financial instruments provide opportunities for better returns. It’s crucial to ensure financial stability and predictability while enabling capital formation,” he noted.
On state-owned enterprises, Dr. Weerasinghe underscored the importance of public investment.
“The government is not in a position to inject more taxpayer money into SOE expansion, and even banks have limited capacity to finance such growth. The best approach is to allow SOEs to raise capital through the stock market while maintaining a level of state ownership,” he said.
“The government has signaled its willingness to shift towards public ownership while retaining strategic control. Offering that part to public is the right move in my view. That’s where you will have opportunities and corporations both public and private will have opportunities to raise capital with the stability in place, with predictability in place, but capital is where that capital formation is important,” the CBSL chief stated.
