State Minister of Capital Markets and State Enterprise Reform Ajith Nivard Cabraal assured the private sector that the rupee was going to be stable and that interest rates would remain low and stable.
Cabraal was delivering the keynote address at the Certified Management Accountants of Sri Lanka Conference on October 21 held virtually.
Sri Lanka is negotiating new financial instruments to handle the downturn caused by the pandemic. Cabraal said “we need special instruments in place so the downturn is managed, so we can have reasonable interest rates. We have had to see that sufficient money is pumped into the economy.”
“Hopefully we can move into these new instruments so that there can be no undue influence on the economy.”
Cabraal noted that the current crisis was unprecedented and as such there was no textbook mechanism to get out of it. He called for innovative thinking and a pragmatic approach to get out of the current downturn.
Sri Lanka has been running a fiscal deficit. Four percent of GDP has been spent in terms of revenue losses to help lift the economy from its low growth trajectory in the period before 2019 and because of the COVID-19 pandemic.
Cabraal promised the private sector that there would be state enterprise reform. There are over 800 projects being undertaken by the current government with over 300 being over Rs 1 billion. Cabraal said “the Government service is to be a lot more efficient. We expect that to be a trigger, the stage would be set for the private sector to do better.”
The country is expected to receive a lot of FDI with linkages to the Port City and Hambantota Port developments.
Cabraal said, “The accountants of the world all 375,000 of them, there were a lot less when I was president (of the South Asian Federation of Accountants), can contribute and move forward with a lot of confidence. We are now a lot more prepared for the fallout. People know how to manage the illness.”
Cabraal noted that the financial system was under some challenges. Loan collection had been difficult and non-performing loans were rising. Due to the economic fallout, there has been a need for moratoriums but at the same time consider the strength of financial institutions. Were possible economic activity as with agriculture was allowed to function during the lockdown. The strong containment of COVID-19 meant that the economy was opened earlier. Cabraal noted that if it wasn’t for strong management of the economy there would have been a need for increased taxation.
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