CB says good housekeeping will see surplus current account by 2016
The Central Bank (CB) hopes to have a current account surplus in the balance of payments after 2016, CB Governor Nivard Cabraal told a forum organised by Standard & Poor’s on ‘Sri Lanka’s Issuers: A Global Perspective’, last week.
“Sri Lanka will have inflows and next year we want to have mid single digit inflation (between 5 and 6),” he said, adding that by embracing the concept of moving towards a US$ 4,000 per capita income as well as developing the country on a five hub concept: Maritime, Aviation, Commercial, Energy and Knowledge has been a priority.
Sri Lanka has put into motion certain factors so that the economy undergoes a gradual structural shift, with the five hub concept as discussed in this year’s roadmap, he explained. “We have already seen signs of that with the current account deficit being moderated, which will continue over the next few years. Our view is that Sri Lanka, after the next four years, will become a current account surplus economy. The fact that we have set up the five hubs concept means that there will be new ventures that will cause inflows into the country,” he said, adding that the target is to become a current account surplus country.
He said that the ‘five hubs’ model will promote tourism, airport and port services, business process outsourcing, etc.
“Education and health services are being promoted and after 2016 we will see a net foreign exchange surplus country,” Mr. Cabraal said. At least 30-32 per cent investment was required to achieve this growth, he said, noting that based on existing savings, Sri Lanka could comfortably raise 24 per cent including Government investments of 6 per cent. This still leaves about 6 per cent of funds to be raised.
Mr. Cabraal said that if the country were to improve production, it could grow by another 1.5 per cent.
“Some of you will be looking at investments abroad.” Mr. Cabraal said Sri Lanka’s petroleum sector is also on the rise with the second bidding round to be completed soon. He said the Central Bank still sees 2013 economic growth at 7.5 per cent, much higher to that of the International Monetary Fund’s estimate of 6.3 per cent. “It’s good housekeeping,” he added.
The Central Bank last week said that foreign inflows are on the rise, with foreign direct investment worth US$ 537 million received by end-June.
It said that notable inflows to the financial account include FDI inflows amounting to $537 million, net inflows to the stock market of $120.2 million, net inflows to the Government securities market amounting to $664.4 million and inflows to commercial banks of $664.3 million during the period.
“Such inflows display that foreign investors’ confidence in Sri Lanka has remained unchanged despite the volatility caused by global markets reacting to prospects of the tapering of quantitative easing by advanced economies,” the Central Bank said in its August Monetary Policy review.
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