Sri Lanka’s economy needs to move faster, be more proactive
View(s):Sri Lankan authorities for too long has allowed the economy to overheat and then play ‘catch up’. “We want to move away from that and be more proactive and to be more forward looking and flexible inflation targeting regime that we are introducing will help us to do that,” noted Central Bank (CB) Governor Indrajit Coomaraswamy.
He made these comments at the recently-held 20th anniversary celebrations of the Trade Finance Association of Bankers (TFAB). The annual Inter-Bank Trade Quiz and Social was also held at the same time at Kingsbury Colombo.
Excerpts of Dr. Coomaraswamy’s comments:
“If one is to describe the economy in one sentence one would say that there is steady stabilisation of the macro-economic fundamentals and some of the policy reforms are beginning to come into place, but I think we need to be more vigorous in the way we implement them and we need to move faster. The direction of travel is positive, we need to go faster. That’s really the message one would want to give.
In terms of monetary policy we are putting in place what may be termed a flexible inflation targeting regime. The idea essentially is to have a much more proactive forward looking monetary policy and to adjust interest rates early rather than too little too late, which was what we have done in the past.
On the exchange rate, in the past we tried often to defend a particular rate against the dollar and have even gone as far as using our scarce resources, often borrowed resources to try to defend the rupee. That is something that we want to move well away from. So we want to manage it flexibly to have a competitive exchange rate. Where the real effective exchange rate is 100, it will take us a bit of time to get there, but we will go there very gradually. We will certainly intervene to stop sharp volatility in the exchange rate market.
The government has recently launched a programme to improve the investment climate. There have been task forces set up on the different pillars of the World Bank’s Doing Business Index there is a clearly laid out Road Map as to how to improve performance on each of those pillars. The trick now is to implement that and the government launched it last month and now need to set about implementing it. Equally the Board of Investment is being revamped and there is going to be a different and more focused approach in terms of investment and facilitation. In the past they sat back and waited for applications and did approvals. The idea now is to identify sub-sectors where the country has a potential comparative dynamic advantage and then and pursue investors, anchor investors in those sub-sectors. If you get four five big anchor investors they can really trigger a transformation of the export performance of the country.
On trade policy the government has formulated a Trade Policy Framework. It’s a 20 page document, in my view it is very well written and for the first time we have a kind of coherent story as to what our Trade Policy is.
Secondly, the government has an Anti-dumping Bill. I think it’s in parliament already, if not it’s on its way. Clearly, if one is going to negotiate trade agreements and there is going to be some liberalization in the economy you got to have an Anti-Dumping Bill in place and that is on the way.”
As part of the anniversary celebrations, the association re-launched its web site www.tfab.org with a better look and feel and with additional features.
The CB Governor presented medals to the members of the inaugural council and the past presidents in recognition of their contribution to the association and to the international trade finance community at large.