The Central Bank is in the process of revising the country’s economic growth target for this year which was initially set at between 4 to 4.5 % , Central Bank Governor Dr. Indrajit Coomaraswamy told journalists at a media briefing held at the Central Bank to announce the Monetary Policy stance of the Central Bank on Friday. “I think 5% is a very ambitious target considering the 3.2 % growth rate recorded in the first quarter this year.
You will come to know the growth rate target at the next monetary policy announcement media briefing,” the Governor said.
According to the Central Bank, economic growth rate in the first quarter this year is 3.2 % compared to 3.3 % notched in the corresponding quarter last year. However, the Governor was optimistic that economic growth in the second quarter will be much better.
The Central Bank decided to maintain policy rates at the current level with the aim of stabilising inflation at mid-single digit levels in the medium term and thereby to contribute to a favourable growth outlook for the economy.
“There were several factors to either ease or tighten monetary policy stance. As the economy is soft there is no need to tighten monetary policy,” the Governor said.
According to the provisional estimates released by the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 3.2%, year-on-year, in the first quarter of 2018, compared to the revised annual growth rate of 3.3% in 2017.
Economic growth during the first quarter of 2018 was mainly driven by the Services and Agriculture related activities while the Industry related activities recorded a moderate growth.
It is envisaged that the Government’s continued commitment to the implementation of structural reforms will help the economy to attain its potential over the medium term, amidst fiscal consolidation. The sustained recovery in the global economy is likely to support domestic economic growth, while the prevalence of a low inflation environment and an appropriately valued flexible exchange rate are also expected to facilitate higher growth.
He said when growth is low and elections are near the tendency is to reduce interest rates to boost economic growth which is an unwise move. Mere reducing of interest rates and pumping money into the economy is not going to help in the long run. Factor marketing reforms, better trade facilitation, better trade policy to take advantage of the location and improving business confidence and not artificially inducing economic activity will boost growth. When asked about steps taken to recover the money from the Treasury Bond scam the Governor said currently there is a court case on it and also that the Bank has done a loss calculation.
‘We don’t want to hide anything. About Rs. 11.7 billion has been frozen in the account of the Perpetual Treasuries,” the Governor said.
On the depreciation of the currency he said many of the currencies across the world have been depreciated and added that lot will depend on the market conditions in Sri Lanka.
With regard to the current position of ETI, the Governor said Blue Summit and Ben Holdings, a company registered in Sri Lanka will jointly invest in ETI.
“The total investment for the company is US$ 75 million which is to come in two tranches,one amounting to US$ 43 million and the other to US$ 32 million which has been already transferred to the company,” an official of the Central Bank said.