Central Bank Governor Dr. Nandalal Weerasinghe said the Central Bank’s policy response to the economic crisis helped Sri Lanka to avoid a total collapse of the economy or prevent a crash landing.
Policy responses to the crisis situation included sharp tightening of monetary policy to curtail demand and collect more revenues by way of introducing tax to meet basic needs of the Government.
“Today, we’re seeing a soft landing instead of a crash landing. However, we are in a stable position but at a low point.” Explaining that short-term economic stabilization measures, introduced by CBSL helped prevent inflation moving up to 100 % , Governor said if those measures were not implemented, Sri Lanka’ s economy would have been in a much worse situation.
“Inflation has already peaked and we expect a downward trend in the coming months. Economic stabilization process has garnered positive results. We have been able to manage with only exports and foreign remittances to pay for basic necessities in recent months.”
Noting that fiscal imbalance led to piled up huge debt, Dr Weerasinghe said it is essential to address root causes of imbalance in particular fiscal imbalance and state owned enterprises have become a huge burden, putting a huge strain on to banks as well as the government. Medium and long term bad policies adopted by previous governments led the country to an economic meltdown, the Governor noted, “ it is important to put much emphasis on promoting sectors that cater to foreign markets or that have the ability to earn more foreign exchange,” he added.