- Says Govt. has disappointed on growth, created higher debt through rupee depreciation and mismanagement
By Nuwan Senarathna
Improving investor confidence to boost exports and attract investment should be the top priority of the Government, former Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal said yesterday, while faulting the Government for failing to boost growth.
“In order to get out of this low growth situation, Sri Lanka has to increase growth to at least 6.5%, but the Government is struggling at 2%. The interest rate has to be brought down as fast as possible, so that companies can have access to capital so that they can expand business activities,” Cabraal told reporters at the Sri Lanka Podujana Peramuna (SLPP) head office in Battaramulla.
He also said import substitution or repatriating foreign exchange within a short time by investors was not the most constructive way to stabilise the rupee. He pointed out that restricting economic activities would not help to stabilise the rupee, insisting such moves would affect the economy adversely.
“Restricting economic activities is not the solution. If the Government wants to stabilise the rupee they should increase export earnings. This is the best way for the Government to increase reserves and encourage growth,” he added.
Cabraal pointed out that restricting imports to stabilise the rupee might create unnecessary pressure for importers and indirectly drive up costs for consumers.
Comparing the economy’s current situation to the pre-2015 era, Cabral claimed the total debt stock reduced by Rs. 19 billion in 2013 and in 2014 it was reduced by Rs. 89 billion due to the appreciation of rupee, but the entire trend had changed from 2015 onwards. He blamed the Government for increased debt repayments due to rupee depreciation.
He said from 2015 onwards, the debt stock of the country had risen due to the depreciation of rupee. “The CSBL annual reports says very clearly that in 2015 the total debt stock increased by Rs. 285.1 billion. In 2016 it was increased by Rs. 186.6 billion. But in 2018 the total debt stock would have increased by at least Rs. 800 billion. Most probably when CBSL report is out for 2019 the figure might increase even more.”
Cabraal also claimed the bond scam that took place on 27 February 2015 had increased the interest rates of the economy, and affected the stability of the economy. “We had shown that due to the notorious bond scam the Government had to incur a colossal Rs. 145 billion loss.”
He said Average Weighted Prime Lending Rate (AWPLR) went up to from 6.3% to 12.1% within a span of four years, claiming that led to the increase of all other interest rates. He claimed due to mismanagement of the Government, the State had to incur a Rs. 2073 billion loss.
“That amount of loss would have been sufficient to construct three additional Hambantota ports, four additional Colombo-Katunayake expressways, eight additional Colombo-Matara expressways, two Norochcholai Coal Power plants, and three Mattala airports,” he claimed.
However, he noted in a future Government the prevailing economic situation could be improved with the support of proper management.