Strong financial system can control inflation - Prof.
Sri Lanka should focus on finding long-term strategies to control
inflation by increasing efficiency and productivity in all sectors,
lecturer University of Prince Edward Island, Department of Economics in
Canada Prof Wimal Rankaduwa said.
Prof Wimal Rankaduwa
Picture by Sumanachandra Ariyawansa
"We must increase efficiency in all sectors through proper resource
allocation in all sectors in a systematic manner to increase
productivity," Prof. Rankaduwa said in an interview with the Daily News
In Sri Lanka on holiday, Rankaduwa said developed countries are
focusing on controlling inflation through an inflation targeting system
considering all market forces in the country. By considering the current
scenario Sri Lanka does not have short cuts to control inflation without
considering the long-term strategies.
Prof. Rankaduwa said Sri Lanka should have a well-developed financial
system like in developed countries. "Because those countries are
focusing on maintaining the inflation ratio around two per cent through
the direct involvement of the Central Bank, which is always mindful of
controlling money supply to achieve the target," he said.
"To cushion the high inflationary pressure Sri Lanka should focus on
developing a strong financial system with the integration of all sectors
including the capital market, bond market and financial and other
related sectors in the country.
"Sri Lanka's service sector is the largest, which contributes 60 per
cent to the country's GDP but we have to give equal prominence to other
sectors including agriculture and the industrial sector as a base for
the financial structure, he said.
Prof. Rankaduwa said a strong financial system in the country will
help to control the high inflationary pressure in the medium to
It is natural that market forces are more powerful and Government
intervention to control prices and inflation will negatively impact on
the entire monetary system without boosting local production and
productivity, he said.
"Sri Lanka should promote a private sector based less Government
controlled system and enhance credibility in the monetary system," Prof.