CB predicts steady growth, low inflation

Favourable business environment, gender equity better than USA:

Shirajiv Sirimane

GROWTH: Sri Lanka would maintain an economic growth of around 8 percent in the next four years while inflation would be lowered to a single digit by the end of the year Governor, Central Bank, Ajith N. Cabraal said.

Speaking at the Central Bank auditorium on the Recent Economic Developments in the country he said the point-to-point inflation by the end of last year was around 20.5 per cent mainly because the Government had to borrow to give subsidies to various sectors to cushion out high oil prices.

However due to several measures taken this has now been brought down to around 13.5 per cent and it would be a single digit by the end of the years.

The Governor said the country also needs to maintain a low inflation rate to maintain competitiveness among their trading partners.

He said it indicates that doing business in Sri Lanka is very good and the gender equity is even better than the USA.

He said for the first time the regional disparity between the Western Province and the other provinces is narrowing.

“The main reason for this is the accelerated development launched under the Mahinda Randora programme targeting the rural areas,” he said.

Cabraal said that Power, Highways, Port expansion and Northeast violence were some of the burning issues for investors.

“Despite these Sri Lanka doubled its Foreign Direct investments last year which’ proves the country’s potential to add new investors,” he said.

He also said that with security forces capturing the Eastern Province the LTTE has been weakened and this too would help to attract more investors and help towards economic development.

Sri Lanka also outperforms many high rated countries in case of doing business and is ahead of many countries in the region.

The Government in a bid to provide better infrastructure facilities has launched gigantic development projects. These projects include the Colombo Port expansion, coal power plants, new highways, airport development and similar projects. Over 16,000 rural roads will also be developed.

The development projects would cost over Rs. 500 billion and is the highest ever in the history of the country after the Mahaweli Development project which was around Rs. 32 billion.

“Another first for these projects is that some of them are being built as public and private sector partnership projects,” he said.

The Sri Lankan rupee is trading fairly stable against the US dollar and other major currencies. On average, the rupee has depreciated by 5.9 per cent during 2001 and 2004 while in 2005 the rupee appreciated by 2.4 percent due to tsunami inflows. In 2006, depreciation was only 5.2 per cent and during 2007 so far the rupee has depreciated by around 3.8 per cent.

He aid that the US dollar has depreciated against the Euro by 13 per cent and against the Pound by 11 per cent and this does not project that the US economy is falling. The floating exchange rate introduced in January 2001 improved the resilience of the external sector while maintaining the external competitiveness of the country.

Cabraal said organised groups that trying to paint a picture that Sri Lanka’s economy is falling and it is a failed state.

“We want to ensure the public that all economic indicators point towards Sri Lanka becoming a prosperous nation.”