CB Governor says working to achieve debt-free country status
Central Bank Governor Prof. W.D. Lakshman has predicted a sustained economic recovery towards achieving a GDP growth rate of around 5 percent in 2021 while working towards achieving the status of an ideal debt-free country.
“Debt free in the sense is not zero debt but easily manageable debt. Ideals are difficult to achieve,” he said pointing out that adequate financing strategies are lined up to maintain foreign reserves at sufficient levels and to meet all maturing debt servicing obligations on time,
Several measures have been taken to ensure the debt service record of the country amid the most challenging times.
With the COVID-19 pandemic affecting the inflows from tourism and many other investment inflows, measures have been taken to limit non-essential outflows, he said.
Addressing the latest monetary policy review media conference conducted online, Prof. Lakshman expressed confidence that the country will achieve substantial positive development changes in the real sector next year.
Answering a question raised by Business Times, he said that Sri Lanka is not facing a liquidity shortage in the domestic foreign exchange market or any forex crisis.
However he noted that the basic idea is to manage imports with some restrictions and with the receivables mainly such as service and commodity exports well as from remittances.
The banking sector will have to manage those inflows and outflows that come through those “mechanisms”, he emphasized,
The Central Bank has no intention to seek International Monetary Fund’s Special Drawing Rights (SDR) facility of US$750 million -$800 million which is offered as member country’s quota and which is a unique instrument without much commitment, he reiterated.
Although SDR is a right of a member country, Sri Lanka is not willing to continue with any IMF economic reform programmes, he said in response to a query from the Business Times.
However in public statement last week on receivables of foreign finding, he categorically stated that “the receipt of around US$800 million under the IMF SDR allocation is expected in August 2021”.
Responding to a Business Times query via email on this government assurance, IMF Mission Chief Masahiro Nozaki reiterated on Friday July 2 that they have not received a formal request for IMF lending from Sri Lanka recently, but stand ready to discuss options if requested.
Clarifying this matter further, Deputy Governor Mahinda Siriwardana said that the Central Bank has not made any formal request from the IMF for a SDR facility of $ 750 million but there is an option for eligibility as a member country.
The Central Bank is focusing attention on increasing the 25 percent dollar repatriation requirement imposed on exporters following a decision by the Cabinet of Ministers recently.
It has already issued a directive to convert dollar earnings to rupees within 180 days and sell 25 percent in the local banks and surrender half (12.5 percent ) to the Central Bank.
These regulations will be revised in accordance with the Cabinet decision on increasing the 25 percent limit “to a higher level” after a study, Deputy Governor Dhammika Nanayakkara said
The aim is to prevent the current practice of exporters holding onto dollar balances expecting a rupee fluctuation, he explained.