“The country has already seen Sri Lanka’s GDP being distributed better than the GDP distribution prior to 2005. At that time, the wealthy Western Province accounted for 50 per cent of the national GDP. But, today, the contribution of the Western Province to the national GDP has reduced to 44 percent. That is not because the Western Province has gone backwards, but because the other provinces have begun to move forward, faster. That is a macro movement in the right direction.”
When Sri Lanka reaches the US$ 100 billion milestone and the per capita income rises above US$4,000, Sri Lanka would find that the structure and strength of the economy would change materially. “While Sri Lanka is on course to achieve that goal, we still need to prepare ourselves for that new scenario from now onwards.
How many of our bankers have reflected on the vast impending changes that were to take place as we march towards this goal? How many have prepared themselves for that new platform; for that new paradigm shift? How many have positioned themselves for this new emerging situation? I think these are surely the matters that should be addressed by each one of our bankers in their own corporate planning sessions and I would urge you to do so, without delay.” “The Government and the Central Bank, wants to create and maintain a conducive platform for the economic stakeholders of our country, so that they are able to work through their normal course of business in a stable, safe and conducive environment.” “Already, we have done much to deliver on that need, but over the next months and years, in order to move towards that goal, we would be working on new needs as well.
As a part of that effort, today, we are looking at the payment and settlement systems that we need to put in place; the type of supervisory approach we should implement, the framework of risk analysis and risk parameters that we should set for banks as well as for the economy; the economic policies that needs to be introduced when the country approaches a truly middle income nation status, the level of infrastructure and business practices that we must set up and maintain to compete with more advanced nations. “These initiatives and many other improvements are already being planned as well as being implemented and that type of focused progress must surely give our growing stakeholder network a high degree of comfort.
In addition, we are keen to ensure that financial inclusiveness takes place in our country in a meaningful manner, so that there would be continuous political stability.” “In addition, we also want to create and maintain spaces and cushions within our economy on a continuous basis, so that it can absorb shocks that may arise from the outside world. That’s very important, if volatility is going to be addressed, and we are to be successful. One of the best ways of meeting unforeseen challenges is to have the strength and space to absorb shocks. We need to build spaces so that those act as shock absorbers.” “For example, if we have an 8 percent growth, we can temporarily take a reduction in growth to about 7 per cent without a major upheaval. If we have low inflation, our tolerance to absorb some sudden global price hikes will be greater. If we have foreign reserves that are in excess of what we need, we can afford to take an adjustment of reducing our reserves to acceptable levels, in an effort to maintain long term exchange rate stability and moderate interest rates. In such ways, in our economic agenda, if we develop the spaces to absorb shocks, we will be in a position to face new shocks when the next major worldwide shock hits us, like we faced the major shocks of the last 6 years.”
“Let’s also remember that there will be shocks in the future too. No one can stop that. We don’t know exactly when, what and how the next shock will hit the world and us too. But, whatever it may be, we will be in a better situation to face it and meet the challenge, if we are strong. That has been, and will be our philosophy to deal with shocks and volatility.” “It is very difficult to progress with certainty in a technical “marked to market” environment, as practiced in today’s volatile world, without having a solid long term view. Every second, numbers and values change. Although forex and commodity traders may take short term views, we, as policy makers and institution leaders, have to take long term views.
Planners and leaders who are managing banks, need to have a long term focus and a long term view.” “Liquidity and cash is vitally important. Cash is key, and we need to address our cash availability in a very, very sound manner, and be in a position to ensure that we are never going to be in trouble as a result of not having sufficient cash. That is basic in banking. Safety is one of the most important factors.