Central bank governor Dr. Indrajit Coomaraswamy yesterday (17) stressed that country requires further growth in productivity in order to avoid getting caught in the middle income trap.

“So if we are to graduate out of this middle income country trap we need to get to USD 12,000 PER capita income. If we are able to achieve an annual average growth of 8% we will get there in 15% years. If we achieve the average growth rate that we have recorded in the post- conflict era which is 5.6% per annum then we can get there in about 20 years,” Dr. Coomaraswamy said whilst speaking at the Sri Lanka Economic Summit 2019.

“We need to get out of the upper middle income country trap,” Dr. Coomaraswamy stressed.

Governor also shared two paradigm shifts which have qualitatively changed the policy making landscape.

“One is the very fact that we have graduated to higher income country status which means we are now even more subjected to the discipline of rating agencies and international capital market. This discipline or the need for discipline is amplified by the fact that in the foreseeable future we have to raise about US $3 billion from international capital markets. That reduces our room to maneuver in terms of policy option in terms of policy space and that is something we have to accept,” governor noted.

“We are beginning to age before we actually have had our economic transformation so that is a challenge. When the demographic pyramid begins to get inverted it becomes much more difficult to drive growth through merely labor augmentation. When you have the pyramid in the normal way more and more people come on to the labor market that provides you to create enough jobs and helps you to drive growth without having to pay too much attention to productivity, innovation, etc.,” governor added.

Sri Lanka now has average of 1% growth in productivity for several decades.

“We simply can’t go on like that,” governor stressed “If we do we will definitely never get out of the middle income country trap,” he added.