Projected increase in foreign reserves $ 10b by 2013

by Sapumali GALAGODA

Gross foreign reserves are projected to increase to around US$ 10 billion by 2013, said the Governor of the Central Bank of Sri Lanka Ajith Nivard Cabraal last week in Colombo.

Speaking at the Road Map, Monetary and Financial Sector Policies for 2011 and beyond, Cabraal said that foreign reserves in the medium term are targeted to be maintained at around five to six months of the import equivalent level.

Governor Central Bank Ajith Nivard Cabraal makes his address

He also said that the foreign reserves management activities will be expanded in scope and extent by implementing a state of the art treasury management system, multiple shift working arrangements and by providing modern physical infrastructure.

“The Debt portfolio will be further restructured to reduce cost and risks while steps will be taken to broaden and diversify the investor base and lower fragmentation to improve liquidity and secondary market operations,” said Cabraal. To ensure a sound regulatory framework, improving operations of the LankaSettle and Primary Dealer Systems and enhancing the secondary market trading of government securities are also planned.

Cabraal said that as proposed in Budget 2011 steps will be taken to establish the new Employees Pension Fund to provide post retirement pension benefits to employees in the private and corporate sector.

Steps will be taken to implement the proposed Citizen’s Pension and Insurance Fund for the informal sector as proposed in budget 2011, he said.

Regional development will continue to focus on SMEs by promoting information and communication technology based SMEs, facilitating service oriented SMEs in the hospitality industry, conducting entrepreneurship development training programs to fill the knowledge gap of existing and potential entrepreneurs in the regions and introducing a new credit guarantee scheme to mitigate credit risk to PFIs lending to SMEs.

A new series of currency notes will be launched next month themed development, prosperity and Sri Lankan dancers. The monetary projections for 2011, a GDP growth of around 8.5 percent with a GDP deflator of 6 percent, BOP surplus of around USD 350 million, net credit to the government to be about Rs.42 billion, credit to the private sector to expand by about 16 percent, while broad money and reserve money growth will be around 14.5 percent, said Cabraal. Proposed policies for financial system stability in 2011 and beyond will be further developed. Continuous improvements will be carried out based on the issues that surfaced during the global financial crisis, risk management will be given top priority, a robust and effective supervisory mechanism in line with the basic framework will be implemented, the adoption of international accounting standards will be facilitated, finance company sector will be monitored even more closely, new mechanisms will be devised to monitor and supervise diversified groups with financial interest, foreign collaboration will be increased, access to finance will be considered as a basic need and given special attention, public awareness campaigns in unauthorised finance activity will continue, further improvements will be effected in payment systems to safeguard public interest, strengthen the AML/CFT framework.

Commendable growth in all key sectors such as agriculture 6.3 percent, industry 8.7 percent, services 7.9 percent is expected. The total annual growth expected is 13.3 percent, said the Governor.

The general provision is to be reduced on a staggered basis by 0.1 percent each quarter so as to reach 0.5 percent by December 31, 2011. The World Bank’s doing business index places Sri Lanka at 102 out of 183 countries; steps will be taken to improve this ranking to 30 by 2016. Economic growth to be 8 to 9 percent over the next few years with all sectors contributing to this growth is planned, said Cabraal.