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| Sunday, 18 July 2004 |
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| News Business Features Editorial
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CB to boost rural economy The new Governor of the Central Bank Sunil Mendis, emphasising the importance of developing the rural economy to increase the economic growth said that the CB is ready to be a facilitator to boost the rural economy. He made these comments facing the Press for the first time after his appointment after serving in the private sector. Mendis said the CB is ready to perform its role as facilitator to boost the rural economy by providing incentives to the agriculture, poultry and SME sectors. He pointed out that Sri Lanka's agricultural sector is not competitive when compared with other countries in the region such as India, China and Thailand. Our yield is very low while the cost of production is very high. We have to adopt new agricultural methods and technology. The CB intends to be a facilitator to overcome these problems through the Agriculture Department, Agriculture faculties of universities, banks and the private sector. The agricultural sector is growing at about 2% lower compared to other sectors. About 70% of the economy is rural based. Increasing farmer income by increasing the yield and reducing production cost is the solution to the problem and not handing out subsidies as thought by many. CB aims to achieve this through market-based micro financing systems. Mendis said that it is not essential to provide concessional loans. The cost of loans are small in proportion to the total production cost of the agriculture products. Under the present micro-financing schemes, the interest rates are about 16% but although the interest rates are low in those concessionary loans the transaction costs are high and therefore not beneficial to the target market. In microfinancing systems the transaction cost is low and has proved to be a success. Sunil Mendis said that another method of facilitating the agricultural sector is to provide concessions to the corporate sector to provide inputs at lower prices. [GW] |
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