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Central Bank reforms for modernisation
The Central Bank is implementing several reforms under a $ 42 million foreign-funded project aimed at modernising the bank in line with current local and global changes. The World Bank and the Swedish International Development Agency (SIDA) are the foreign donors while the Central Bank is contributing $ 10.7 million to this project, according to the Central Bank annual report for 2001. Here are some other highlights among the bank's activities as stated in the report:

  • A Voluntary Retirement Scheme was successfully implemented in which 713 employees opted for retirement from the bank by December 2001 resulting in the bank being able to reduce its staff strength to 1,218 from 1,908. Another 103 employees will retire in the first half of 2002 on a staggered basis.
  • Completion of a due diligence study and valuation of assets of the Sri Lanka Automated Clearing House which is to be divested by April 2002 to Lanka Clear Pvt Ltd, an organisation jointly owned by the Central Bank and commercial banks. (The bank is planning to introduce a networked system in which local cheques would be instantly cleared).
  • Gross income of the bank fell to Rs. 29.2 billion from Rs. 30.8 billion in 2000. Expenditure of the bank also fell to Rs. 14.3 billion from Rs. 20.7 billion
    n The 31st meeting of the board of directors of the Asian Clearing Union will be held in Colombo in May, after its last meeting was held in Myanmar in May 2001. Central Bank Governor A.S. Jayawardena is the ACU chairman for this year.
  • The volume of currency notes and coins by end 2001 stood at Rs. 76.5 billion against Rs. 73.3 billion by end 2000 with notes in circulation representing 96 percent of the total currency in use.
  • During the year, the Fort magistrate imposed a fine of Rs. 1 million on a director of a finance company for not maintaining the required amount of liquid assets against deposit liabilities. The accused would be liable to rigorous imprisonment of one year if he fails to pay the fine.
  • Of the nine failed finance companies, four were under liquidation by end 2001.
  • The total investment portfolio of the EPF was worth Rs. 246 billion by end 2001 of which Rs. 1.26 billion was invested in the stockmarket. EPF had a total of 8.8 million members, up from 8.5 million in 2000.

Speedy end to war essential - CB
The Central Bank says a speedy resolution of the ethnic conflict is necessary as the country cannot continue to bear the cost of a prolonged war.

"The ongoing peace efforts, with strong and wider domestic and international support, have created optimism with regard to finding a lasting solution. The international community will not only help Sri Lanka in its efforts to find lasting peace but has also pledged to assist its subsequent rehabilitation, reconstruction and reconciliation efforts," the bank said in its annual report for 2001 released last week.

W.A. Wijewardene, the bank's senior deputy governor, said growth rates could take off as much as 3 to 4 percent over the current growth rate if peace is restored in the country. "There are a lot of inquiries from institutions and private foreign investors about investment prospects and if there is an increase in investment, the growth rate would rise sharply," he said at a news conference called to present the report to the media.

Dr. A.G. Karunasena, the bank's economic research director, said Sri Lanka's economy is expected to grow by 3.7 percent this year, up from a negative growth of 1.4 percent in 2001, because of a much-improved local and international economic environment.

"Economic growth last year contracted to 1.4 percent for the first time since 1948 but this year we see positive growth of 3.7 percent because the weather is improving and the world economy is recovering, particularly in the US," he said. Economic growth in 2000 was 6 percent.

Karunasena said the economy's performance last year fell far below expectations due to severe external shocks like recession in the west, the September 11 terrorist attacks in the US, the Tamil rebel attacks on the Colombo airport in July and a prolonged drought that spilled over from 2001 and led to crippling power cuts.

The bank report, in a section on the outlook for 2002, noted that achieving the fiscal targets in this year's budget and implementing already-announced policy adjustments and economic reforms would be critical to ensure the realisation of the expected economy recovery and the projected improvements in macro-economic stability.

It said the agriculture sector is expected to recover with a growth rate of 2.2 percent with increasing production in all major crops except coconut which is expected to record a further decline due to the long lagged effect of poor rainfall in 2000/2001. Tea production is projected to improve by 3.7 percent as weather conditions improve while rubber output is expected to grow by two percent, benefiting from the anticipated increase in international rubber prices.

Paddy output this year is projected to improve by seven percent, up partially from the drop in 2001. Inflation is expected to rise by nine percent by the end of the year in line with moderate increases in domestic food supplies and import prices.

The report said that fiscal adjustment alone is not adequate to reduce the overall budget deficit and borrowings. Such efforts have to be complemented with a strong public enterprise reform programme including the introduction of automatic price adjustment mechanisms and cost minimisation measures.

"In order to increase public support for such reform it is essential to convince the public that all Sri Lankans, not only the users of subsidised goods/services, have to pay, now or later, for losses, in public enterprises, caused by maintaining their product prices below the corresponding cost of production," the report said.

Solar power firms eye Jaffna
Shell's solar operation in Sri Lanka is the most successful rural solar company in the world among Shell entities, a senior Shell executive said.

"It is biggest and commercially most viable rural solar company among the seven rural solar companies that we have," Philippe de Renzy-Martin, CEO Shell Solar BV told reporters during a visit to Colombo last week.

Shell solar which is part of Shell Renewables Lanka Ltd, is expecting a 50 percent rise in sales every year, with sales this year targeted at a high 20,000 from 5,400 in 2001. The company has sold 10,000 units in the past few years out of a total 25,000 units installed by all solar firms across the country.

Pradip Jayewardene, business development director at Shell Renewables said members of an association representing the solar trade were planning to visit Jaffna to assess the potential for selling solar units.

"The industry is looking at the north and the east as a potentially good market," he said adding that GTZ, a German-supported donor agency, was facilitating the Jaffna visit.

De Renzy-Martin, asked how the Sri Lankan solar operation has been more successful that any other Shell solar company, said there were many reasons for this. "Affordability is better. Rural people here have more money than rural farmers in South Africa for instance. The access and infrastructure in Sri Lanka's rural areas are much better than other Shell sites," he said.

About half of Sri Lanka's population - approximately nine million people or two million households - don't have access to electricity from the national grid and solar power is among the most efficient and cheapest to power homes.

De Renzy-Martin said that Shell Solar BV, the fourth largest solar company in the world, was also investing a lot of money in wind power units across the world but as far as Sri Lanka was concerned, Shell's concentration would mainly be in solar power - apart from its other interests like LPG.


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