Spotlight: Econ Op-eds in Summary (Week ended 30th September '20)
1. Financial institutions under pressure to lend: A dangerous trend
By: Rienzie Wijetilleke & Kusum Wijetilleke
· The combined impact of the Easter Attacks and COVID-19 pandemic has resulted in many consumers resorting to debt to make ends meet. Rising levels of credit card debt and other unsecured personal debt may result in a snowballing effect, posing a major systemic threat.
· Against this backdrop, banks must lend with caution, taking into account their funding structure and capital adequacy. They also face the difficult task of determining the risk profile of borrowers and taking steps to mitigate risk, which remains a challenge given the present economic environment, moratoriums ending in September and non-performing loans on the rise.
· Bank financing remains especially important to Sri Lanka as a growth driver, given constrained FDI. However, policy consistency, stability of currency, multi-stakeholder planning of key industries and attracting both FDI and foreign talent to the country must first be addressed prior to enhancing lending portfolios to spur economic growth.
2. Role of Special Economic Zones in development of Sri Lanka
By: Utthara Wanigasekara
· Sri Lanka, which occupies a strategic geographical location close to major global sea lanes, has long aspired to be a regional trading and services hub in the Indian Ocean. Taking its location as an advantage, the country can establish special economic zones (SEZs) to attract FDIs, create meaningful jobs for younger generation and help Sri Lanka to be competitive in the global market.
· Sri Lanka in fact, already has significant experience of SEZs in the form of Export Processing Zones (EPZs), which are a subset of SEZs focused primarily on manufactured exports. These zones have played a crucial role in the development of Sri Lanka’s exports, particularly the apparel sector, which today continues to account for around 50% of the country’s goods exports.
· Taking the current economic disruption caused by the pandemic as an opportunity, Sri Lanka can use Special Economic Zones as an economic tool, which can play an important role in attracting FDI, creating more employment opportunities in order to achieve industrial development in a sustainable, efficient and effective manner.
(Compiled by: Chayu Damsinghe, Promodhya Abeysekara, & Eshan de Mel)
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