CB, a major stakeholder in country’s development

The people of Sri Lanka have given President Mahinda Rajapaksa led UPFA government a majority and their aspirations are high. They gave this mandate to make Sri Lanka a developed country. In achieving this target the Central Bank has a greater role to play and is one of the major stakeholders, said Economic Development Minister Basil Rajapaksa.

Central Bank Governor, Ajith Cabraal hands over a report to Economic Development Minister, Basil Rajapaksa  Picture by Sudath Nishantha

Addressing the staff of the Central Bank last week he said the role of the Economic Development Ministry is crucial to alleviate poverty, develop the regions and speed up the infrastructure development. To achieve these targets the Central Bank should guide us on the correct path. We as politicians take instant decisions at the request of the people. But the Central Bank should guide us on the correct path to usher economic prosperity.

Achieving the per capita income of US$ 4,000 from the current US$ 2,600 would be possible with the viable economic environment in the country. The economy grew at 3.5% in 2009 compared to 6% growth recorded in the previous four years. It is considered good due to the challenges faced internally and externally last year. In addition most other economies recorded a negative growth. We are hopeful of achieving 7% or more growth this year, said Director Economic Research K. D. Ranasinghe.

He said, that the external sector experienced a downturn until the end of quarter one but rebounded strongly in the second half of last year.Exports dropped by 13% last year but are planning to reach the 2008 level at least this year. Most imports are sourced from Asia while only 15 % is from European countries.

In the sector of tourism there is an increase of 50.3% during the first quarter of this year compared to the corresponding period of last year and we hope to surpass the level of 2004 this year.

The Central Bank planned to keep the deficit at 7% but it increased to 9.8%. The public debt stock increased from 16% of GDP in 1950 to 87% of GDP in 2009. The total outstanding was Rs. 1,219 billion in 2000 while it increased to Rs. 4,161 billion last year.

The budget deficit and the depreciation of the rupee are the two main factors for the increase in public debt. The country’s national savings grew from 17.8 percent to 23.9 percent of the Gross Domestic Production (GDP) during the last year. The domestic savings also showed a growth of 18 percent during 2009 compared to 13.9 percent in the corresponding year. Investments recorded a slight decline of 24.5 percent compared to 27.6 percent recorded in 2008. Emerging countries such as Singapore, China and India has national saving of over 30 percent of their GDP.

That is one of the reasons to have a high investment ratio. If we are able to increase our national savings, it will support us to increase our investments. The increase in savings is an encouraging sign as many investments are flowing into the country after the conflict ended, said Ranasinghe. Additional Director Economic Research Mahinda Siriwardena said that 6% of the gross domestic product is spent on developing the infrastructure be it roads, port, electricity or water supply and sanitation. He said that significant changes are necessary in the following institutions CEB, CPC, SLR, SLTB and NWSDB.

At present the contribution of the private sector is less in infrastructure development therefore encouraging public-private sector partnerships is a must for rapid economic development. -SG