Central Bank to support poverty reduction drive

The Government and the International Monetary Fund (IMF) conducted constructive discussions on the country’s way forward.

As Sri Lanka is no longer a poor country, and therefore, not eligible for many concessions, the setback suffered by the economy could only be corrected by addressing current concerns and taking positive measures to create a vibrant economy, the Governor Central Bank Arjuna Mahendran said.

Stressing that the main concern was the budget deficit, the Governor said that the country is moving into a liberalised market regime.

“We do not want to end up in a massive credit bubble.

The recent interest policy rate hike is not unique to Sri Lanka, all emerging markets face this situation. However, it will not impact us adversely,” he said.

“If the country maintains economic growth at 5-6 percent, the level of poverty could be reduced. For this we need to address the issue of low income and malnutrition.

The Central Bank has taken this seriously and five new departments have been set up to support the poverty reduction initiative,” Mahendran said.

“The economic policies of Sri Lanka are well thought out.

However, our revenue in terms of GDP is very low. We need to work out a fine balancing act to achieve revenue growth. As rating agencies will look at the loan pile up and revenue collection in tandem,” Mahendran said.

“We have a lot of debt out there, but we do not have sufficient revenue to match it, therefore, it is a challenge. We need to have a coherent plan. This is where the IMF’s role is most important,” he said.

“Taking a cue from the Community Re-investment Act in the USA, Sri Lanka needs to invest in rural areas outside Western Province. We have to work with the government at different levels to deal with poverty and support commercial agriculture. We anticipate economic growth of 6 percent or more this year. It is necessary to build regulatory measures to ensure that the market mechanism is in effect,” the governor said.

- SJ