The Central Bank (CB) said the International Monetary Fund (IMF) has given certain assurances that the US$1.9 billion loan sought by the government of Sri Lanka will be granted. According to the CB Governor Ajith Nivard Cabraal, speaking at the Sri Lanka Economic Summit 2009 this week, all the technical details have been finalized and it is just a ‘matter of time.’ He said Sri Lanka has a right to access key funds from the IMF and only looked into a loan from the Fund following a flight of capital which took place on the heels of the global economic crisis.
The loan comes with certain conditions but Mr. Cabraal said those conditions have not disturbed any macro-economic steps the CB has taken and they have not interfered with any policy stances. He said that the loan was expected to come in April or May 2009 but that the country has ‘weathered that period.’ He added that the government would like to have the loan as an anchor at a time when the global economic situation is in turmoil.
Mr. Cabraal reiterated that he believes the loan will materialize.. “Let it come at the time it comes but we will continue in the same manner until it comes,” he said. Mr. Cabraal added that the CB is also forecasting a higher growth rate for Sri Lanka in 2009 to a figure between 3.5% and 4.5%, a revision from the lower projected growth rate of between 2.5% and 3.5%.
At a technical session at the Summit, Mr. Cabraal said the CB is resisting ‘directed lending’ as a policy and believes that banks should have freedom to choose the sectors they support. However, the CB has taken steps to direct banks to lend to agriculture as it is seen as a critical area. Mr. Cabraal said it has been a reasonable amount and that banks should support agriculture as it is a national priority.
On relaxing regulations on banks, Mr. Cabraal further stated that banks have to show some responsibility when it comes to certain issues such as related party transactions and conflicts of interest. He said most banks have at least 15 pages of conflicts of interest.
CEO of Hatton National Bank (HNB) and Chairman of the Sri Lanka Banks Association Rajendra Thiagarajah said around 40% of HNB’s business comes from the small and medium enterprises (SME) sector and that it is a pattern HNB wants to continue by working with local chambers. Mr. Thiagarajah also said that the North Western and Eastern provinces are seeing infrastructure development through building roads and bridges which facilitate logistical movements.
After a recent visit to those areas, he said improvements have to be made in the agriculture and fisheries sectors which lack good cold storage and dry storage facilities as well as access to markets. He suggested the government may want to look at buy-back programmes to assist the sectors in those areas. |
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