Opposition hoodwinking masses - CB Governor

Central Bank Governor Ajith Nivard Cabraal said the Opposition was attempting to hoodwink the masses and exploit the fuel price hike to further their political agenda and that people should be wary of these underhand tactics.

Speaking to the Sunday Observer yesterday, he pointed out that the people should look at the bigger picture and not at the isolated case of price hikes.

"If you look at our inflation figures for last month, it was just 3.7%. When you compare the January prices in 2011 with that of 2012, it has gone up by less than 4%. Even if you add the new fuel increase it willgo up by about 2 percent only in another two months".

He said less than 6% inflation is manageable and that many other countries struggle with 12% - 14% inflation rates.

"In Sri Lanka we had a 28% inflation rate at one time.

The rise in inflation began with the open economy in the late '70s and early '80s,. Then inflation was about 30% at a time when we had only 8% growth."

The CB Governor said although it was not an ideal situation, it was not unbearable and there was no need for the Opposition to provoke people and draw them to the streets.

"The Opposition takes hold of different items and say that there is a major price hike.

If you take the entirety of the basket of commodities you will get the real picture."

This has been necessitated mainly by increase in fuel prices abroad. For a long time the government cushioned the increase in oil prices without burdening the public because prices of other commodities were also high."Now that prices of other goods have come down, inflation rates could be at managed "

"We have reduced borrowing rates drastically, the interest payable for every Rs.100,000 borrowed has come down from Rs.20,000 to Rs.13,500. The prices of many commodities including rice, coconuts, dhal, onions, and poultry products have come down considerably.

An average family of four will consume about 27 kilos of rice a month.

The price of red rice in 2010 was Rs.73 and it has come down to Rs.55 per kg now. The cost the average family would have had to spend on rice was Rs.1,970 in 2010 and now it has reduced to Rs.1,485."

Duty on vehicle imports have come down.

There is a massive reduction in prices as a result. On the contrary,there is a massive increase in the trade deficit because of this huge demand for imports. These are facts.

"We don't produce a single drop of oil in this country, every single vehicle that travels, has to run with imported oil. That is the challenge.

If oil prices go up we have to pass it down to the consumer. In the event prices drop we will then see that prices are reduced and pass the benefit onto the customer."

"We have not reduced the people's purchasing power," the CB Governor said adding that the Opposition spreading information that prices have increased drastically and to make out that the COL is unbearable is misleading.

-MF