Central Bank to go ahead with 2018 Road Map | Sunday Observer

Central Bank to go ahead with 2018 Road Map

Dr. Indrajith Coomaraswamy
Dr. Indrajith Coomaraswamy

The Central Bank (CB) has frozen financial assets amounting to Rs. 13 billion belonging to the Perpetual Treasuries Ltd., (PTL) and will recover the undue profits made by it through the bond transaction, Central Bank Governor Dr. Indrajit Coomaraswamy said last week.

He said it is up to the court to decide if the amount to be recovered should be increased or not and accordingly action will be taken by the government’s legal officer to regain the money.

“Any shortfall as per the direction of the court, will be regained by freezing the company’s institutional assets. The Central Bank will take action on ill-gotten funds gained, with the support of government agencies,” the governor said.

According to the report of the Presidential Commission of Inquiry into the bond scam, Perpetual Treasuries Ltd. had gained an undue profit of over Rs. 11 billion from secondary market transactions within five months.

The Governor said the Central Bank will go ahead with all its programs in line with its Road Map for 2018 irrespective of whatever the political situation in the country.

Responding to the political instability in the country following the outcome of the local government elections, the Governor said the Central Bank had laid out clearly its course of action to be carried out through the year and that it will not be affected due to the recent developments in the country’s political front.

“We have set map through which we intend to traverse and that’s it,” the governor said. Speaking at a media briefing on the first Monetary Policy Review for the year, the Governor said the Central Bank will get down to work as it has been, since the launch of the Road Map to achieve a flexible Inflation Targeting framework, setting up parameters to strengthen the exchange rate, improving EPF management, ensuring banks meet the Basel 11 standards, solving problems of the Non Bank Financial Institutions, carrying out anti money laundering measures and strengthening resilience of the economy amidst global shocks.

Questions were posed as to how economic goals could be achieved on shaky ground. In reply the governor said prolonged political instability will not help accelerate economic growth. Political stability is a basic ingredient for development of a country. The faster we get back to stability the better.

The Central Bank projects this year’s economic growth to be between 5 and 5.5 percent from an unsatisfactory four percent growth rate notched last year marred by the adverse weather throughout the year.

However, economists cast aspersion on the possibility of achieving fiscal consolidation boosting economic growth due to the debt dynamics coupled with the unfavourable political climate in the country.

Sri Lanka’s total foreign debt service payments amounts to over US$ 2.9 billion this year, US$ 4.2 billion in 2019 and $ 3.6 billion from 2020-2022.

The Central Bank came under heavy flak for poor handling of private sector workers retirement fund especially for its zero return generating investments.

Responding to the accusations, Central Bank officials said steps will be taken to manage better the EPF funds with transparency and come up with a mechanism to invest in the primary and secondary markets in the stock market.

Meanwhile, the Central Bank decided to maintain the policy interest rates at their present levels given the recent developments in the domestic and global macro economic scenario.

“We decided to maintain the key rates as at the current level even though there were factors supporting easing policy rates.

While the output gap in the economy made the reason for easing, the easing of inflation in December held ground for maintaining rates at the present level,” the Dr. Coomaraswamy said.

Inflation as measured by the National Consumer Price Index on a year-on year basis declined to 7.3 percent in December as against 8.4 percent in November 2017.

The Central Bank expects inflation to stabilize to a mid single digit level during the remainder of the year. A noteworthy indicator last year was credit to private sector decelerating to 14.7 percent in December from 21.9 percent at end 2016.

The Central Bank expects credit to the private sector to be around 13.5 percent by end 2018.

However, the Central Bank Governor harped on what he said at the last review that overall growth during 2017 is disappointing.