Clash over economic data assessment and lack of public criticism
Present and former central bankers clashed this week presenting divergent views on economic data and the development path.
Central Bank (CB) Governor Ajith Nivard Cabraal, speaking on the recent CB roadmap for 2014 at a panel discussion held in Colombo, said Sri Lanka is expected to maintain a growth rate of 8.2 per cent in the next three years. The discussion was organised by Ceylon Chamber of Commerce in association with the Daily FT.
Nisthar Cassim, Editor, Daily FT moderated the session and three panellists out of the four – Rajendra Theagarajah, CEO, National Development Bank; Rajan Brito, Vice Chairman, Aitken Spence PLC and Prakash Schaffter, President, Insurance Association of Sri Lanka generally accepted the roadmap as conducive for business and industry.
But the fourth panellist Dr. (Ms) Anila Dias Bandaranaike, former Central Bank Assistant Governor, made a headlong criticism which prompted Mr. Cabraal to counter these assertions.
The snubbing of the criticism by Mr Cabraal portrayed the usual public servant arrogance in accepting public opinion that now prevail in the state sector. Further, the countering and the reluctance to accept criticism also implied that the Sri Lanka Central Bank is ‘omnipotent’, according to some participants at the event.
Dr. Bandaranaike pointed out that one of biggest problems is that there is no space available for public debate and discussion and to voice constructive responses and criticisms. She said that there is a failure in achieving the targets set by the government and said that the growth target has been 9.2 per cent, but it lags behind today at 7.2. She exposed several other areas too where the government has failed to meet the targets set out.
She also pointed out the jugglery of statistical jargon that prevented a clear picture of certain situations.
She said that there was five years infrastructural development and predictions of higher growth levels and noted: “But, it is time now to shift from physical infrastructural development to human infrastructural development because human capital is vitally important for the country’s economic stability”. Dr. Bandaranaike pointed out that the focus has to be shifted to such areas as educational reforms, environmental reforms, etc.
Mr. Cabraal said that in preparing the roadmap there was a huge element of planning and it was prepared after spending thousands of man days by 600 odd top Central Bank financial and economic experts. In his presentation Mr. Cabraal placed more stress on what has already been achieved that helps the smooth running of the economy of the country.
“Going into the future with macro fundamentals, we have to move into a new trajectory 8.2 per cent average growth for the next three years. Starting from about 7.8 per cent in the year 2014 and going on those lines thereafter,” Mr. Cabraal asserted. Enumerating on what has already achieved, he said that economic growth in 2013 stood at 7.2 per cent. Investment has been maintained at 30 per cent and inflation in 2013 declined to 4.7 per cent while core-inflation was at its lowest at 2.1 per cent.
He said that unemployment remained low at 4.5 per cent adding that one of the great achievements has been reducing the budget deficit to 5.8 per cent last year from 6.4 per cent in 2012.
He said that in 2013 exports grew to 6.9 per cent and the trade deficit declined to 8.7 per cent. He said the rupee was stable under all types of volatility that is taking place in the rest of the world. He said that the global uncertainties are tremendous and extremely volatile and some of those contagious situations would also reach Sri Lanka but the country was also able to record the highest growth rate in the South Asian Region.
Economic growth is now moving to the provinces, he said, pointing out that in the Western Province in 2005 it was 51 per cent but now has dropped to 43 per cent.