Governor of the Central Bank of Sri Lanka (CBSL) Dr. Nandalal Weerasinghe says that collective policy measures are painful for businesses and households and that such measures are imperative to prevent devastative impacts of the soaring inflation and economic instability, and to restore economic conditions that are essential for economic stakeholders.
Speaking at the National Policy Symposium for promoting investments and entrepreneurship in Sri Lanka in Colombo yesterday (25), Weerasinghe mentioned that the recent economic crises resulted in numerous uncertainties and instability in the country, which directly affected investments and business sentiments.
The CBSL chief, who pointed out that the sharp rise in inflation eroded the profitability of the entrepreneurs, also emphasized that it hampered new investment due to lower investable profits.
“Sharp rise in inflation, which is a key interest of businesses, eroded the profitability of the entrepreneurs and hampered new investment due to lower investable profits.”
“Inflation is the number one enemy for any economy, as we experienced. Now it’s coming down gradually”, he added.
The CBSL recognized the need to restore price stability interest of low inflation to ensure macroeconomic stability, he said, added that it is the key objective to decisive measures to control the rise in inflation, and also balance of payments.
Speaking further, Dr. Weerasinghe stated that two of the issues that the country had, were the rise in inflation and the foreign exchange crisis, noting that the CBSL has taken very decisive measures to curtail and prevent inflation from rising further.
“We have taken very decisive measures to curtail and prevent inflation rising, going out of control and went to the peak of 70%, now it’s under 30% that certainly will be a single digit by the fourth quarter of this year with the measures that we have implemented.”
“Collective policy measures are painful for businesses and households. In the short run, such measures are imperative to prevent devastative impact of rising inflation and economic instability to restore economic conditions that are essential for economic stakeholders including the businesses and entrepreneurs”, he added.
The CBSL chief also highlighted that it is important to understand that short-term painful measures are necessary to restore long-term economic stability.
Dr, Weerasinghe, commenting on the businesses, mentioned that the restrictions on imports are gradually being relaxed, and some restrictions on capital transactions will also be relaxed and that both will facilitate businesses in the near future.
He also emphasized that they have already removed margin deposit requirements on imports adding that there will be further relaxations with the situation improving both stable exchange rates and also low inflation.