ECONOMYNEXT – Current economic conditions in Sri Lanka does not require an International Monetary Fund bailout, State Minister for Money and Capital Markets Nivard Cabraal has said.
“The conditions that are available in Sri Lanka today would not necessarily need us to go to the IMF for any bailout,” Minister Cabraal told a business forum hosted by Asia Securities, a Colombo-based investment house.
“We are quite confident that we can manage what we have now, and with the expected revenues and the expected foreign inflows that we have targeted, particularly from exports which have been quite robust with fairly good order books
“We have seen remittances even stronger than prior to Covid.”
Cabraal said there were investment commitments to the Port City and about 2.5 billion dollars in foreign direct investments were expected in 2021.
“All these factors give us the confidence to say that we can manage the resources that we have, which are not extraordinarily large but which are sufficient to take us through 2021,” he said.
“And thereafter we will have much more placid times and we are confident that we can make that work without too much difficulty.”
There have been rising unease among analysts over large scale monetizing of debt with unprecedented volumes of money being printed, despite operating a soft-pegged exchange rate regime.
Excess liquidity is now about around 25 percent of reserve money (without excess liquidity) or about 1.2 billion US dollars, with warning that it will pressure the currency as soon as there is a sustained recovery in credit, regardless of whether there are import controls or not.
“We have of course seen monetary accommodation in the last few months but that is true with every country,” Cabraal said.
“A lot of countries have gone through this process with a reasonable degree of monetary accommodation.
“But in Sri Lanka we have also seen stable exchange rates, which has been one of the hallmarks of our macro-management in the last few weeks or months.
“Which has made sure that Sri Lanka’s rupee stays stable, that our interest rates stay sable and we can have a reasonably good passage towards growth in the next few months and years.”
Cabraal said a strong recovery was seen with the third quarter of growing 1.5 percent after contracting 16 percent in the second quarter.
Businesses were adapting to working amid Coronavirus, he said.
In 2021, if tourism resumes and comes to around 50 to 60 percent of 2019 levels, it will help the economy, he said.
The government also had a public sector investment pipeline which will be directed to roads and water (Colombo/Dec17/2020-sb)