From having faced its worst economic crisis two years ago, Sri Lanka has stabilised more than expected in the last 18 months. On a recent LMDtv programme, World Bank Group Country Manager for Sri Lanka Gevorg Sargsyan commended this stabilisation while highlighting challenges that the nation must gear up to face.

He noted the importance of finalising debt restructuring, which “will allow the country to regain access to the global market at a much more beneficial rate,” enable the private sector to expand and simplify international transactions.

“Many bilateral donors and partners will resume their financing” he said, adding that it will build stakeholder confidence.

“We are seeing signs of recovery – but a recovery is still pretty far away. We’re still far below many indicators,” he cautioned. And while acknowledging the new legislation and reforms, he emphasised the need to remove existing red tape and facilitate business.

Sargsyan also pointed to the need to eradicate poverty: “There are still millions of people who suffer. The poverty rate has gone up from 11-13 percent to about 26 percent and there are millions of people who are a shock away from poverty. Small businesses are really suffering and face many challenges.”

SMEs and micro businesses account for a substantial percentage of the value added to the country, as well as employment. “These businesses are the foundation of a middle class that will be an active participant in civil society, has a voice and is part of positive changes in any country,” he opined.

And he asserted that “the importance of SMEs is absolutely essential but they have suffered disproportionately during the pandemic and crisis.”

“About 20 percent of them closed during this period, which is a staggering number; and then about half face challenges in accessing finance due to the crisis. They often cannot repay their own debt and have shortages of skills,” Sargsyan elaborated.

The picture is bleak but not all doom and gloom, in his view: “There are some signs that things are getting better. There have been good guidelines issued for banks on business revival units to help restructure some of the debts of SMEs, and also provide technical assistance and improve financial literacy.”

He added that the World Bank is “working along the entire value chain, and with government institutions and banks, to put in place new initiatives to support SMEs in terms of financing and also accessing external markets.”

Sargsyan remains positive and discussed opportunities that the country can work towards.

He noted: “One is increased and more productive investments. If there’s a sense in the [global] market that things are stable, then local companies can start expanding again.”

“It’s also a good opportunity to attract more foreign direct investments – especially to make sure that there’s an increase in productivity by introducing new technologies and importantly, leveraging the incredible potential of Sri Lankans abroad,” Sargsyan asserted.

Working towards expanding the footprint of renewable energy is also key. He explained: “This is such an opportunity for Sri Lanka because it’s a win-win – a reduction in the cost of energy for households and businesses, and it ensures energy security for the country.”

Another opportunity is tourism, which is progressing well. “We are on the right track in terms of recovery and growth but this also means that more investments in infrastructure are required,” he said.

Sargsyan added that “it would require better management of the existing unique natural capital that the country has. It requires a lot of effort, skills and getting people who can be part of the hospitality sector.”

Another opportunity he cited was value addition and sustainability in agriculture. “So much is being produced, consumed or exported without adding much value so this creates opportunities for many SMEs to be a part of the glo­bal value chain,” he stated.