Comment - Maintaining CB's independent role

According to the UNP leader the country is moving towards a failed state and the country's economy is in deep crisis. He says people are dying of hunger due to the skyrocketing cost-of-living.

The country's economy is worse than Zimbabwe. Investors are leaving the country and the stock market is plunging. On the political front the blame is too grave and the country is in a serious political crisis and heading towards dictatorship.

In human rights, Sri Lanka's situation is worse than Rwanda, Somalia or Iraq. As far as the charges against displaced people are concerned Sudan is far behind Sri Lanka.

These are not the usual petty political claims in the local political theatre. The opposition has internationalised the issue and the opposition leader has even gone to the extent of asking the international community to stop aid to Sri Lanka. The people, who read, listen and watch pro UNP media may feel the same.

The other side is more or less a fairy tale. If you listen to Trade Minister Bandula Gunawardana or attend weekly government press briefings you may hear that the economy is buoyant and growing at the fastest rate in the history or in the region, unemployment rate is declining, inflation rate is going down and the people are living happily and there are no issues whatsoever.

On the political front they may say that the government is stable, the East is liberated and in the Wanni LTTE power may fall within the next few days. In addition they may attack the opposition and break away factions. The media too is elaborating on the same tale and the situation in the country is fantastic.

With equal weight at both ends the media as a whole in the country is balanced and to get a real picture the masses would listen to the pros and cons and would draw their own conclusions. However, the majority of the people who are battling to face the hard realities of life do not have time for such a political or economic analysis and they believe one extreme end or ignore everything altogether.

In this backdrop it is up to the Central Bank (CB) to give the true picture of the country's economy to the people and the world. Last week the Governor Ajith Nivard Cabraal himself took responsibility and came before the media with a detailed presentation on the economic situation of the country.

Having listened to the CB presentations we are sure that Sri Lanka's economy is not in the doldrums as projected by those with vested interests. Is this the reality? With serious external and internal shocks can the country's economy be in such a buoyant position. If the CB presents the negative side of the economic situation or elaborates on the real challenges the economy faces its exercise would be more fruitful.

However, the facts presented by the CB on the status of the economy is strong and though there is a crisis it is not as grave as the opposition attempts to portray.

According to Cabraal the economy is vibrant and resilient to internal and external shocks. We are certainly not as bad as some may claim. Assuming that the CB is independent the people of the country may breathe a sigh of relief.

According to the CB, the economy is growing at over 7% and the growth momentum continues amidst the oil shock, terrorism and natural disasters. Consumer and investor confidence is strong. Public and private investments are increasing and the fiscal situation is improving. The economy is exposed to external shocks but is resilient because of the openness of the economy.

The private sector owns 80% of the economy and 70% of the economy is open to the world. The private sector comes out of various hedging and therefore the economy goes well.

The unemployment rate has declined to 6.2%, the lowest ever recorded. Public debt both external and internal are coming down. The banking system is strengthening and the NPL ratio is declining. The rupee depreciation is in line with CB targets.

These statements of the CB carry more weight than the statements of politicos at government press briefings because they are independent and also because figures, charts and graphs support them.

Shooting down false arguments and misleading publicity against the country is very important and the CB as an institution is still maintaining its independence as all central banks in the world. If the CB justifies economic repercussions of political decisions taken by governments this credibility would diminish.

According to CB officials the increasing violence in the North East does not seriously affect the economy.

Because the Western Province alone accounts for more than 50% of the country's GDP. The Northern province accounts only for 3% of the GDP while the East accounts for another 5%. This argument is fine and now we have been asked to think of development ignoring the North and East whether there is war or peace.

The CB Governor's justification of the tourism sector crisis in the backdrop of the declining security situation is disheartening. The maximum we can earn by the tourism industry is only Rs. 500 million per annum.

It is equal to the sum we have to additionally pay for petroleum imports if the crude oil price goes up by $3 per barrel. The declining security situation is not a matter for concern. But in reality the cumulating economic impact is more than double.

In the past few months crude oil prices have increased from $50 to $ 75, or by $25 per barrel. If we were to consider the magnitude of the external shock, it is more than eight times of the revenue from the tourism industry.

We are acutely aware that the war is not the government's wish. However, that should be justified by the political authorities and not by the CB. The duty of the CB is to highlight the economic cost of the conflict.

Sri Lanka's economy will grow at 5% per annum even if there is no government.

This is a wonderful country and we are blessed with all the gifts of nature.

All the crises we are suffering today are man-made and all political parties are responsible for this state of affairs.

If the aim of the government is higher growth rate the abundant resources in the North, East as well as industries such as tourism are extremely vital.