Economy out of control, former CB governor says
View(s):The Sri Lankan economy has completely gone out of control today according to former Central Bank Governor Prof. W.D. Lakshman who believes that had the government continued restrictions of certain imports there won’t be a foreign exchange crisis.
“Look …the foreign exchange situation was okay by the end of 2020 and we ended up relatively sound in terms of balance of trade,” he said in a telephone interview.
“Import restrictions should have continued, I was recommending that but no one was willing to listen at that time. Now they have re-imposed these restrictions making it virtually impossible to get back to what it was. The restrictions, during my time, were put in place by the Treasury and I wanted that to continue but they (government) wanted to relax it, and that was one of the reasons why I quit,” Prof, Lakshman, who resigned and was eventually replaced by Ajith Nivard Cabraal, said.
Brushing aside criticism that it was during his tenure that the rupee should have been floated, Prof. Lakshman said: “Holding onto the dollar? It was not only my wish but the wish of the government. We maintained it at the Central Bank but at times discussed this with Monetary Board and the Finance Ministry and it was a joint decision.”
He said the present list of import restrictions is longer than what they wanted at the time. “But if this system had continued at that time, there wouldn’t have been this loss of confidence. Confidence is the key issue issue today.”
He said that today no money is coming into the country. “During my time (2021) the reserves were going down but we were expecting swap facilities from other central banks to beef up reserves. However these expected flows didn’t materialise,” he added.
The problem was “we were expecting too much and not getting these short term inflow of loans,” he said. Some economists have blamed the country’s economic woes on decisions taken by the former governor.
On Thursday, Sri Lanka secured a US$1 billion credit line from India for the import of essential items.
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