By: Staff Writer
Colombo (LNW): Former Governor of the Central Bank of Sri Lanka (CBSL) Dr. Indrajit Coomaraswamy highlighted the macro-economic stress as the main reason for the regression in Sri Lanka’s socio-economic indicators during the past 75 years of the country.
Addressing a virtual event to launch the policy report ‘Understanding Multidimensional Vulnerabilities: Impact on People of Sri Lanka’ prepared by the UNDP, he welcomed efforts taken to address interference on the work of the Central Bank via the passing of the New Central Bank Act.
“I am not talking about the last 5, 6 or 10 years. Over the last 75 years we have regressed. And the main source for this regression has been macro-economic stress in my view.”
Commenting further, Dr. Coomaraswamy emphasized that the main cause for these macro-economic issues has been the government’s fiscal operation, adding that the negative effects of that has been amplified by fiscal dominance in monetary policy.
“They have been interference in the work of the CBSL from time to time”, he stressed.However, he also mentioned that he is pleased to see the new Central Bank of Sri Lanka Act and the tight fiscal operations currently underway within the country.
Meanwhile, the former CBSL chief alleged that in the past, nobody has taken interest on macro-economic issues, except to complain.
“All are complaining on the depreciated exchange rates, higher interest rates and the increasing inflation”, he said, adding that “nobody asks the question as to why this is happening”.
This is another part of the governance failure. It’s not the governance failure only on the politicians but the entire country. Nobody takes enough interest in these issues.”
Furthermore, Dr. Coomaraswamy claimed that all the depreciated exchange rates, higher interest rates and increasing inflation are symptoms only, mentioning that all the people have to look at the causes of these issues and exert pressure for those causes to be addressed.
Sri Lanka faces an economic crisis partly resulting from its twin deficit economy. A twin economy indicates that its domestic expenditure exceeds its national income, making it prone to external debt and reliance on foreign capital flows
The Government has, for several years, acquired multiple loans from other countries and international organisations to finance the provision of public services.
Several issues have also been hitting tourism in the country. Initially, a series of extremist attacks on churches and hotels started affecting the industry (which accounted for 5.6% of the country’s gross domestic product).
The COVID-19 pandemic, which prevented travel, followed in 2020. Finally in 2022 came the war between Russia and Ukraine, two of the countries that accounted for the majority of tourists in the country
Sri Lankan Government also introduced a fertiliser ban that significantly reduced the production of rice and tea, two of its main export products.
