Central Bank says economy doing just fine, rest is misinformation

The Central Bank said this week the country’s economy was in good shape and that allegations of poor economic performances were due to a lack of awareness and deliberate destabilisation campaigns.

The regulator of the country’s financial sector and the body entrusted with maintaining price stability in the country, said the rate of inflation was under control and that the economy is doing well.

The regulator said that deliberate misinformation campaigns by “interested parties” are the cause of most ‘perceived’ economic evils in the country. These ‘perceived’ economic problems were attributed to terrorist and political agendas.

Conspiracy
The Central Bank said that all national economic indicators demonstrate the prevalence of a healthy economy, despite claims to the contrary. The economy is showing satisfactory growth and the rate of inflation is falling. Fiscal and monetary controls are showing good results with lower government expenditure, increased government income and no unnecessary money-printing. Foreign remittances and foreign investments are also increasing.

Therefore, said the bank, it is negative claims about the economy that are causing ‘perceived’ economic problems.

“Various negative claims and perceptions have been built up,” said the Governor of the Central Bank of Sri Lanka, Ajith Nivard Cabraal, at a conference on Wednesday, titled ‘Recent Economic Developments, Challenges and Strategies.’ The aim of the conference, said the Central Bank, was to eliminate misconceptions and set the record straight about the real state of the economy. The bank listed a number of reasons for such misconceptions.

“This is perhaps due to lack of awareness, deliberate misinformation and negative publicity campaigns conducted by interested parties including terrorist groups and sympathisers, (or due to) promotion of various economic and political agendas and organised efforts to cripple Sri Lanka’s economy and to weaken the state’s capacity and ability to take counter terrorist measures,” said Cabraal.

Consumer spending is also on the rise, said the Central Bank, indicating that people have more money, despite allegations of hardships due to the rising cost of living. More people are buying vehicles, building houses and owning mobile phones, said the bank, indicating more money in people’s pockets.

“Unemployment has fallen sharply, the number of registrations of motor vehicles and motor cycles continue to rise sharply, the usage of mobile phones is expanding rapidly, the number of new apartment buildings and individual houses are increasing and selling fast, supermarket chains are expanding rapidly and the number of banking outlets are increasing sharply,” said Cabraal.
“So people have money,” said Cabraal.

The bank also pointed out that the country consumed US$ 940 million worth of imported food items last year. This trend, said the bank shows that each person in the country is able to spend US$ 47 per year to buy imported food, again indicating that peopl have money.

Therefore, said the bank “perceptions and claims” of economic problems, attributed to various reasons, are “not consistent with reality.”

Growth plans
Meanwhile, the government’s infrastructure development programme is expected to boost economic growth further. The Central Bank says the massive US$ 5 billion programme, planned over 2007 to 2011, will also accommodate large amounts of private sector input. Private sector participation is expected to hold down the government’s external debt in financing these projects. “The government is looking to work on the basis of public-private partnerships,” said Cabraal.“There will be many private sector projects in areas like tourism, fisheries and infrastructure,” he said.The government is also considering an international bond issue to set up a separate bridging fund for the projects. This is to make sure the package of urgently needed infrastructure projects continue uninterrupted once started.

“We are considering a US$ 400 or US$ 500 million bond issue that we will use as a buffer. This is because we will need bridging finance in case we do not get all the required funds at the correct time. So this fund can be used as a buffer to make sure the projects continue without a break,” said Cabraal. Investments in oil exploration are also expected to contribute to the economy. Production sharing agreements with private sector oil exploration partners are expected to be signed by early 2008.

The bank sets a target of 7% to 8% economic growth over the next 2 to 3 years. The rate of inflation is expected to come down to 4% to 5% over the period.“We are targeting an inflation rate of 4% to 5% in 2 to 3 years. We have a special programme to target and reduce inflation to the level of our trading partners to remain competitive,” said Cabraal.

The Central Bank says Sri Lanka’s economy shows a track record of resilience to internal and external shocks and will bounce back once more on the back of national economic plans.