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“We have regained stability and begun recovery”

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The government’s budget reflects the confidence of the country’s macroeconomic team in having restored a large degree of normalcy to the economy.

The introduction of many forward-looking growth policies and a lack of upward revision in the rates of taxation are clear signs that the worst of the crisis has already passed and that the economy would recover in the period ahead.

Central Bank Governor Dr Nandalal Weerasinghe made these comments on a post-budget discussion on November 14 on the at Hydepark show on a local TV network. Dr Weerasinghe noted that a lot had already been done in terms of securing future financing lines and reaching stable levels of government revenue while cutting back on expenditure.

“In this crisis situation we have to regain stability. From March onwards we made a request to the IMF for a stabilization package. From April onwards when I took over, we took several stabilization measures. Inflation was rising due to the loose monetary policy we had. We had also announced a debt standstill as it was obvious we were going into a debt crisis.”

All of this culminated in considerable stabilization of the banking sector. From an economic perspective, this is reflected in the increased availability of essentials like cooking gas, medicines, and petroleum products. Weerasinghe added, “Inflation has peaked and now we see it coming down.”

The government’s drawing on the banking sector for its dollar financing requirements is also expected to sharply drop on a Year-on-Year basis with the improved credit arrangements the government is negotiating. Weerasinghe said, “Now we need financing assurances and get credit relief for the completion of our debt restructuring package. “We don’t see a lot of that mentioned in this budget as a lot of that has already begun and been completed.”

Weerasinghe commented on how the budget didn’t necessarily reflect one of a country facing an economic crisis with many welfare benefits provided to the populace. He said, “This budget is for 2023 onwards. You however don’t see the traditional features of a stabilization budget you see in a budget. The government has already implemented several short-term measures and as a result, you see the situation has improved considerably.”

The government is not ignoring the requirement of having long-term growth policies. Weerasinghe said, “(following stabilization) the next steps are to increase growth in this country.” The country is expected to introduce a bankruptcy code shortly which will help for the quicker resolution of companies facing distress and see a swifter reallocation of productive assets. The government has already finalized changes to the legal framework governing rental arrangements which reflect the overall policy direction of the government. (DP)

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No major creditor group at odds with budget

  • No major creditor group has raised concerns with the measures of the budget. Debt renegotiation is already in the very late stages and it is highly unlikely that the recent budget will have impacted any creditor groups’ understanding with the government.
  • It is also expected that Sri Lanka will be able to increase welfare measures if the fiscal targets, export figures, and foreign direct investment figures of the economy exceed expectations which is quite likely.
Monday, November 21, 2022 – 01:00











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