Lanka to contain inflation between 10 to 11 per cent

Shirajiv Sirimane

Sri Lanka would be able to maintain inflation between 10 to 11 per-cent by the end of 2008, Governor Central Bank Ajith Nivard Cabraal said yesterday.

Presenting the Central Bank Road map for 2008 he said this could be achieved if there are no uncalled for external shocks such as rising oil costs and high international commodity prices.

"If the oil prices for 2008 increases to US$ 90 per barrel as against the baseline forecast of US$ 85 per barrel, the BOP surplus may reduce."

He said low inflation would also increase in maintaining low salaries, which would invite more investments. In a bid to curtail inflation, the new Colombo Consumer Price index is expected to moderate on a gradual path during this year.

Capacity building initiatives would be intensified in 2008 to prepare and update the banking industry with the regulatory and supervisory requirements such as Basel II, integrated risk management and IAS.

"We also intend to issue guidelines on integrated risk management to banks to improve the risk management process," he said.

The Governor said chip based credit cards would be introduced the banking sector by June 2008. The Central Bank has enough currency notes and coins in their position he said.

In its endeavor to support financial markets, the public debt management policy of the bank would be further developed and strengthened through awareness programs and strengthening the risk management frameworks.

"In addition introduction of new instruments to facilitate identified investor groups too would be considered for the enhancement of a efficient debt market," he said. The Bank would further fortify intermediary participants in the government security market to consolidate the Security market.

"The Central Bank has recognised the need to revisit the exchange control function during 2008 to facilitate the role of foreign capital in the Macro economic development of the country in a market friendly environment," he said. Capacity building initiatives would be intensified to prepare and update the banking industry with regulatory and supervisory requirements.

Action steps would be taken to create a common database for the Central Bank and Labour Department soon. The Governor also unvelled a new logo for the institution and added that they were happy with the manner in which the Road map for 2007 was successfully implemented.

"The unfolding of this road map is a reflection of the Central Bank team's wide capabilities, high degree of professionalism and with the announcements to the public in turn enhance the policy of effectiveness.

He said the Bank was happy the way the international community responded to Sri Lanka's inaugural band issue which was oversubscribed by five times last year despite negative political publicity. "This is a clear indication of economic stability in the country," he said.