Central Bank intervenes to tackle importers’ miseries
View(s):Sri Lanka‘s dollar shortage is being handled effectively with the intervention of the Central Bank (CB) using new tools introduced in the monetary authority’s six month road map, re-appointed CB Governor Ajith Nivard Cabraal divulged.
A large number of food commodity containers including milk food which was struck at the port due to non-payment of import bills as a result of dollar shortage, has been cleared following the intervention of the CB, he told a media conference on Thursday.
The news conference was convened to announce the outcome of the monthly monetary policy review in which the CB’s Monetary Board has decided maintain policy interest rates unchanged.
The imports are gradually picking up, he said adding that no one can say that “we do not have money to finance imports”, noting that imports have increased by over 10 per cent this year.
There have been excessive imports of certain food items, particularly sugar, which is being hoarded to create an artificial shortage, he claimed.
According to the 6-month Road Map “the Central Bank will intervene in the FX market by providing the funds to finance the country’s energy bills and thereby to infuse liquidity”.
Among the other tools suggested in the plan was to promote investments in rupee denominated government securities with a guarantee on the exchange rate, and the strengthening of mandatory conversion of export proceeds.
The CB will introduce concessions for importers soon to prevent a continuous increase in prices of essential food commodities.
Sri Lanka’s gross official reserves fell to US$2,581.3 billion in September 2021 from $3,543.5 billion in August, official data showed, amid continued liquidity injections
The CB is set to boost its foreign reserves and finances via an extensive plan that includes increasing export earnings’ repatriation and tax reforms, as well as external funding, currency swaps and possibly repurchasing or renegotiating debt.
Sri Lanka’s economic growth is expected to bounce back in the third quarter and it is expected to reach 5 percent by the end of this year, he opined.
He expressed the belief that a growth momentum is progressing at present and there was no need to dampen that and neither to stimulate it any further.
Sri Lanka has no intention to defer its debt repayments in the future. “A credible debt management strategy will be worked out and it will ensure that Sri Lanka will not face any difficulties,” Mr. Cabraal pointed out.
“Therefore, the Central Bank’s main priority will be to provide clarity with regard to the movement of Sri Lanka’s macro-economic fundamentals in the preferred path and ensure stability in the financial sector,” he added.
He re-iterated that there were no plans to seek support from the International Monetary Fund to bolster Sri Lanka’s sagging foreign exchange reserves.