The country has maintained an unblemished record in debt repayment and it will continue to maintain this status contrary to the domesday predictions made by those with vested interests, said Central Bank Governor Prof. W.D. Lakshman.
The governor was addressing the media on the recent developments of the economy on Friday.
“Doomsday predictions have been made based on certain policy moves taken during the second half of 2010 all of which has now changed and we are confident there would be better results,” the Governor said, stressing on putting a halt to foreign financing for the deficit.
He said negotiations to raise foreign exchange inflows through swap arrangements with overseas agencies are currently on but details cannot be divulged.
“We hope through such measures to fill gaps and move through this couple of years to achieve rapid and shared growth by 2024-25,” the Governor said. On seeking assistance from the IMF he said it is not advisable to do so and obtain guidance from the donor. He said an alternative policy approach which will be market oriented but also guided by the State is being adopted. According to the Governor, import restriction on non-essential commodities to manage the balance of payment will continue for a certain period.
“Though not for a long period, import rationalisation is essential to address the balance of payment and curtail the outflow of foreign exchange,” Prof. Lakshman said. The country’s foreign reserves stood at USD 4.8 billion as at end January 2021. Foreign reserves stood at USD 5.7 billion towards the end of 2020. However, with USD 1 billion of foreign debt repayment coming this year the level of reserves is speculated to be inadequate to manage balance of payment.
The Government is determined to move away from dependence on food imports as a long-term policy approach, the Governor said.
However, according to the regulator, economic growth is expected to be in the range of 5.5 to 6 percent this year. “A positive growth this year could be achieved due to the limited closure and vaccination measures taken to overcome the crisis,” the Governor said.In the road map launched early this year the Central Bank Chief noted that while working within a framework of market economy, the performance of the open economy policies introduced from 1977 will be reviewed vigorously, so that the country and its economic agents could follow a focused approach to becoming an industrial economy.
He said a policy framework with such long-term objectives would generate greater macroeconomic benefits than being driven by short-term vicissitudes in the market and unbridled desire for short-term financial gains. In accordance with the policy framework outlined in the ‘Vistas of Prosperity and Splendour’ and Budget 2021, the Government has provided policy support to improve domestic production, particularly in Agriculture and Industry sectors.
These fiscal stimuli and incentives would help expand the domestic capital base, improving domestic supplies. These developments would reduce the import dependence of the country, enhancing domestic production ratios in agricultural and industrial supplies.
Domestic supply improvements would enhance Sri Lanka’s external competitiveness and export potential, while also reducing seasonal volatilities in domestic inflation to a great extent. These features of the new macroeconomic policy framework will be incorporated into economic management decisions of the Central Bank more closely, to ensure a coordinated approach to pushing the country on to a rapid growth path and sustained prosperity.