New government reviews country’s current financial programme
The new government will be reviewing the current financial programme to come up with their adjustments and additions to it in accordance with their fiscal policies.
CB Governor Dr. Indrajit Coomaraswamy (centre) in a happy mood on Friday, at his last media conference before stepping down. On his left, is Senior Deputy Governor Dr. Nandalal Weerasinghe who is likely to be appointed as Dr. Coomaraswamy's successor. Pic by Indika Handuwala.
This was disclosed by Central Bank (CB) Governor Dr. Indrajit Coomaraswamy when he addressed his final media conference in Colombo on Friday 29, bidding farewell to his illustrious career at the helm of the country’s monetary authority.
Dr. Coomaraswamy announced his decision to step down from the helm of the CB with effect from December 20 thanking media personal for assisting the bank in disseminating the economic situation and monetary matters credibly during his tenure of last three and half years.
He noted that the issuance of the CB’s first US$500 million Samurai bond to the Japanese market scheduled towards end November after the previous Cabinet approved the lead managers before the presidential poll will be delayed due to the present process of reviewing the financial programme.
The enactment of the much debated new Monetary Law Act now tabled in parliament will also be delayed under the present circumstances, he said adding that the new Act prevents the CB from purchasing securities issued by the Government, by any Government-owned entity, or any other public entity in the primary market.
The new Act includes amendments for introducing new flexible inflation targeting the monetary policy framework, enhancing the governance standards in management structure of the CB, introducing several disclosure requirements and recognising the CB as the macro prudential authority of the country, he added.
Answering a question raised by a journalist, Dr. Coomaraswamy noted that the new tax reductions are expected to boost the economic activity supplemented by investor confidence and accommodative monetary policy.
However he noted that the new government will reveal its plan to stabilise the revenue shortfall in enforcing new tax relief package in the short and medium terms.
Improved investor confidence, supported by political stability and fiscal stimulus driven boost to aggregate demand, is expected to drive short term growth.
The introduction of an appropriate policy mix, which utilises the available limited policy space prudently, would support the economy to reach as well as enhance its potential over the medium term, he said.
While noting the fiscal slippages thus far during the year, the Monetary Board on Friday observed that the recent tax revisions would support lower inflation and higher economic growth in the short term, a CB media release revealed.
It was of the view that greater clarity with regard to the medium term fiscal path of the government is required to assess the impact on the economy over the medium term.
Accordingly, considering the current and expected conditions in the economy and the financial market, the Monetary Board decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7 per cent and 8 per cent, respectively.