Central Bank Governor Ajith Nivard Cabraal noted that in the hypothetical that the government was to enter into an agreement with the International Monetary Fund there would be untold hardship placed on the people of the country. Cabraal further suggested that the country did not require IMF assistance and that the Central Bank was to soon outline a financial roadmap that would allay any fears on the creditworthiness of the State.
The Monetary Board chose to maintain both the Standing Deposit Facility and Standing Lending Facility at the current rates of 5 and 6 percent respectively. The board was of the view that the recent spikes in inflation were global in nature and were not brought about by excess demand in the system.
Cabraal noted that there was little even advanced economies like the US could do in order to maintain a stable cost of living given rising prices of key commodities like oil, coal, and gas.
Cabraal dismissed media fear-mongering on marketplace shortages and noted that every issue from milk powder, to cooking gas, to petrol was no longer witnessing the shortages portrayed by the media. Cabraal noted that if the country was to enter into an agreement with the IMF it was highly likely that the government would be compelled to depreciate the currency, sell off key assets, reduce the government service, and cut key welfare schemes. Cabraal highlighted that recent Treasury Bill issuances were successful in raising the funds required by the government.
Cabraal was of the view that the month to month volatility of the treasury bill rates was in line with normal practice and dismissed concerns that the recent 50 basis point month on month reduction seen at the auction was either excessive or that it was heavily slanted towards the shortest term 91-day issuance. Cabraal noted that the government’s budget could be financed quite easily.
The government finances are expected to see a considerable boost with the closing of key deals that are yet to be finalised. The Central Bank has lent on the banking system, the currency dealers, and even on the informal money market to control the exchange rate and flows.
Cabraal defended the policy of forcing the conversion of export proceeds noting that was the way international trade was meant to function. Cabraal had recently met with the Ceylon Chamber of Commerce which further understood and promoted the policies of the Central Bank in relation to the management of foreign exchange. The country expects to see increasing revenues from migrant workers and has been pressuring the passport office to create the necessary documentation for overseas travel.
The tourism sector is expecting to see over 10% rates of year on year growth in receipts in the coming year. The Central Bank is seeking legal advice and moral suasion to gain control of the informal foreign exchange market.
Cabraal blamed Central Bank governors under the previous government for raising financing in an ad-hoc manner through International Sovereign Bonds for the current hardship felt by the banking sector.