Sri Lanka is on course to achieve macro-economic targets in the near-medium term, and focus must now shift towards longer-term targets up-to and beyond 2030, according to Central Bank of Sri Lanka (CBSL) Governor, Ajith Nivard Cabraal.
“We can clearly see that the country is on a much better trajectory than it has ever been in the past and as we move closer to our targets for 2016. The macrofundamentals have become much more predictable, therefore it is now the right time to start looking at targets from 2020 to 2030,” Cabraal stated.
He made these comments subsequent to the launch of Central Bank’s Annual Report for 2013 yesterday.
Cabraal went on to state that the country would have to make structural adjustments to the economy in order to drive itself through middle-income status. However, he reiterated that low-level inflation would remain a priority despite remaining non-committal on the outlook for interest rates going forward.
“We will continue to ensure that inflation is maintained at its current low levels and interest rates are one of the primary tools we have in controlling inflation.
“Currently we believe that interest rates are at appropriate levels and the CBSL will continue to monitor this area and respond as required,” he noted.
Lowered interest rates and its impact on retirees living on their savings, in addition to the possible onset of drought and its impact on the agriculture sector and food price stability were among near-medium term challenges highlighted by Cabraal.
“We believe that private sector annuity products must now be developed in order to meet the needs of retirees and these products will have to find innovative methods of delivering returns above those of interest rates,” he stated.
Touching on credit growth, Cabraal noted that private sector credit had declined through the start of 2014. However, he anticipated a pick up through the second half of the year adding that attracting private equity funds to the country would play an important role in credit growth.
“Total money supply remains at the right levels and we expect it to pick up in the second half. The CBSL is keen to see private equity funds operate in Sri Lanka and would like to see all well managed companies gain access to such funding in order to help them develop and compete internationally,” Cabraal added.