A well-coordinated and focused implementation effort by the government, policymakers and the Central Bank of Sri Lanka saw Sri Lanka recovering from its worst economic crisis sooner than expected opined Governor Central Bank Dr. Nandalal Weerasinghe at the
Macroprudential Surveillance Department (MSD) of the Central Bank of Sri Lanka (CBSL) organized Press Conference held on the “Financial Stability Review 2023” in the Atrium of the CBSL Head Office on Friday.
He said that this was not a one man show but a collaborative effort. He recalled that Sri Lanka’s inflation was one of the highest in the world at around 70% a year ago but it was brought down to a single digit and is now at around 3%. The scarcity of drugs, fuel, gas and other essentials is no longer an issue and import restrictions (baring motor vehicles) too have been lifted.
The high interest rates and the floating dollar rate was stabilized enabling people to remit money through banking channels most importantly the reserves which shirked to around USD 20 million increased to 4 billion plus. All these brought back stability to the economy and made foreign investors look at Sri Lanka with renewed interests.
“Hence the ‘real owner’ of this remarkable positive shift is a collective step.”
With the IMF coming out to assist Sri Lanka, difficult and so called unpopular decisions were made by the parliament such as increasing taxes. He said that though Sri Lanka sought IMF assistance on 16 previous occasions the country did not feel its impact since the nation had enough reserves.
“However this time around the people felt IMF presence since the reserves were very low and the country did not have purchasing power even to purchase essentials like medicine, gas and fuel ect.”
He said that many countries did have ‘buffers’ and due to this their economies survived the C-19 pandemic while countries like Sri Lanka and Argentina which had almost depleted their foreign reserves fell. To stop a repeat of this, the government is now on a consolidation path and is strengthening their buffers and people too have to make temporary sacrifices.
“Firm decisions had to be taken by the government to cushion out the economic crisis which today have paid off. “With several reforms in the banking sector as well, today the Central Bank has independence sans political interference.”
The Governor said the country needs to have an institutionalized framework to strengthen government fiscal policy. “The parliament needs to enact that and establish these practices. Further, the Governance Diagnostic Report will be vital in this context as an assessment of the Anti-Corruption Landscape of Sri Lanka,” he said.
