Sri Lanka's capital market evolution: Path to economic growth

Colombo Stock Exchange's (CSE) former Chairman of the Board of Directors Dilshan Wirasekara, in this interview examines how the sustained progress of capital market development is built on strong foundations of progressive strategies, deep expertise, and consistent policy.

- 

How far have the capital markets come in Sri Lanka, and how do we compare with other countries in the region?

We've historically been known as a nation of savers. Growing up, we were told that saving was vital. Back then, we weren't aware that saving diminishes the value of one's earnings. However, the needs of emerging generations demonstrate a shift in investment behaviour.

This shift reflects a global trend since the COVID-19 pandemic: financial disintermediation, where investors and borrowers connect directly. High interest rates are declining, liquidity is rising, and financial literacy is improving. These factors demand more efficient capital deployment.

Regionally, Sri Lanka is competitive. We are close behind India, Singapore, Malaysia, and Thailand, and ahead of Pakistan, Bangladesh, and some other South Asian counterparts. Our strengths lie in regulatory stability, investor education initiatives, and technology. The CSE is also more streamlined and transparent, with a policy framework conducive to equity investment. While capital markets currently contribute a smaller fraction of Sri Lanka's GDP, the momentum for growth is increasing.

What significant achievements were made during your three-year tenure as Chairman of the CSE?

The CSE has seen record profits in the last three years. This progress was a result of the Board's collective collaboration and an integrated approach built on three key pillars: Product Diversification, Modernisation, and Broadening Investor Participation. Our achievements built upon existing work and ensured continuity.

For product diversification, we moved beyond a single product to offer a wider spectrum. This included debt and fixed income products, sustainable bonds, high-yield debt products, and Islamic finance instruments like Sukuk. We also rolled out mechanisms for share borrowing and lending, and initiated plans for index funds.