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CB Gov. predicts:
SL’s economy may overtake projected 5% growth
 Sri
Lanka’s economy may grow stronger than the projected 5.0-5.5 percent
fuelled by the proposed Chinese investments, IMF loan deal and better
export revenue in the second half of the year. The economy grew 4.8
percent last year compared to 4.9 percent in 2014.
Central Bank (CB) Governor Arjuna Mahendran said there are ‘glimmers’
of what could be a reasonably strong growth outlook for the rest of the
year.
“If we get a lot of Chinese investments in the second half of the
year we could even see higher growth.” He said he does not see any need
for more interest rate hikes unless there is a sudden growth in credit.
The whole direction of the economic policy of the government has now
changed. There is less emphasis on government investments in mega
development projects such as highways and airports, he told a press
conference on the state of the economy last week.
“Under the previous regime, such projects were done with heavy
borrowings. You won’t see that magnitude of investment in the future.
The government has decided not to borrow excessively. The future
development projects will be based on a public-private partnership (PPP)
basis where equity is used for funding,” he said.
Sri Lanka to raise funds in China’s renminbi market
The Governor said Sri Lanka hopes to issue
bonds in China’s domestic renminbi market in about three months.
“We plan to raise cheap funds worth about $ 500–1,000 billion,”
he said.
“It would be much cheaper to raise funds in
renminbi than in US dollars.
“We expect to raise funds at around five
percent interest on an annual basis,” he said.
Funds raised in China would be used to pay
Chinese firms coming to build infrastructure in the island or as
government counter-party funds in projects, he said.
The People’s Bank of China has granted
approval for Sri Lanka to issue bonds in China in renminbi.
The CB will soon advertise for lead managers,
either Chinese investment banks or international banks.
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The quality of economic growth will change over the next couple of
years, he said. “That would help increase investor confidence in our
market as well.”
Looking at existing trends, he said bank lending last year was very
strong. Total bank lending last year was Rs. 600 billion, up from Rs.
200 billion in 2014, a three-fold growth.
“That money must be used in some form of productive activity.
Electricity consumption has also increased significantly, which shows
improvement of some economic activities. The tourism industry is
improving and overall economy is improving,” he said.
Talking about the International Monetary Fund (IMF) discussions over
the past few weeks on a fund facility agreement, Governor Mahendran said
he was hopeful of getting US $ 1 billion through the deal which is to be
finalised within the next two weeks.
“However, what we are looking at is to have an agreement with the IMF,
and are ‘not’ looking at the amount. The agreement will act as a
catalyst for other lending agencies such as the World Bank, Asian
Development Bank, Japan International Corporation Agency and several
bilateral agencies to lend money to the government and the private
sector,” he said. |
