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Central Bank Chief warns of making economic policy changes

By: Staff Writer

May 12, Colombo (LNW): Sri Lanka is facing mounting pressure to maintain its current reform momentum, as experts continue to warn that any deviation from the path could potentially derail the country’s progress and plunge it back into crisis.

The Governor of the Central Bank Nandalal Weerasinghe, issued a cautionary message regarding potential changes to the country’s current economic policy.

Weerasinghe emphasized that any deviation from the existing policy framework could lead to a return to economic stagnation.

He reiterated this imperative, echoing similar calls from global agencies such as the World Bank (WB), the Asian Development Bank (ADB), and the International Monetary Fund (IMF).

Just a month ago, these institutions stressed the absolute need for Sri Lanka to stay the course, emphasizing that there is no room to steer away from the current path.

The urgency of this call stems from the upcoming elections, which historically have been times when policies and reforms are often sidelined and sacrificed in favor of strategies to fetch votes.

Weerasinghe’s message was clear and firm, although he did not directly mention the impact of the upcoming elections on reform momentum.

Speaking at a panel discussion hosted by the Central Bank, he emphasized the critical need to sustain the stability that has been achieved so far.

“What we want to convey very clearly and very loudly is the need to sustain the stability that we have achieved so far. That’s the key message that we are trying to convey this time,” he stated.

He also stressed the importance of maintaining consistency in overall macro policies, including fiscal and monetary policy, as well as structural reforms.

“It is important to continue this reform momentum and move in the same direction, the right direction going forward to sustain stability,” reiterated Dr. Weerasinghe.

To achieve long-term gains, Sri Lanka must address several key areas in the short term. The Central Bank Governor stressed this includes completing the remaining parts of the external debt restructuring and ensuring the successful completion of the IMF review to provide assurance that the country is on track.

The completion of these tasks will be crucial in maintaining the confidence of global financial institutions and investors in Sri Lanka’s economy.

He stated that the country is currently undergoing the second review and anticipating the third tranche of the IMF program, and highlighted that while there have been alterations to the program since the staff-level agreement in September 2022, the fundamental objectives remain unchanged.

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