By Shiran Illanperuma
COLOMBO, Nov. 18 (Xinhua) -- Sri Lanka's 2021 budget proposals address a significant need for a national development bank and include measures to stabilize the financial sector, a Sri Lankan business-cycle analyst said.
Managing Director of Econsult Asia Kenneth De Zilwa told Xinhua that Prime Minister and Finance Minister Mahinda Rajapaksa's proposals to merge three state banks into a National Development Banking Corporation (NDBC) will create the first dedicated state development bank since a wave of privatizations in the 1990s.
"Sri Lanka will finally have a fully fledged development bank that can take on the risk capital of start-ups and small and medium entrepreneurs, enabling them to gain funding access to technology and new machinery in order to industrialize the country," De Zilwa said.
The new development bank would help achieve President Gotabaya Rajapaksa's vision to "stimulate capital formation and enable local entrepreneurs in their journey to becoming global players," De Zilwa said.
He said the proposal was pragmatic and would entail bringing multiple state banks involved in segmented development finance under one roof, with a legal framework for dealing with risk capital.
De Zilwa welcomed the government proposals to tighten regulations and merge smaller finance companies, which he said have mushroomed in disproportion to the size of the country's economy in the last 10 years.
"The time is right for consolidation, which will bring more stability and depth to the financial market, and also ensure that depositors are not penalized for poor management decisions and concerns around the loan books," De Zilwa said. Enditem