Reuters reports from an interview with K D Ranasinghe, chief economist at the Sri Lankan central bank:
Sri Lanka will seek a waiver from the International Monetary Fund (IMF) after failing to meet the 2009 budget deficit target agreed under a $2.6bn loan deal, the central bank said on Monday. Read more
The Sri Lankan central bank has dismissed the idea that the delay of an IMF payment will have any effect on investor confidence.
Following the IMF’s announcement, governor Ajith Nivard Cabraal declared: “There is absolutely no impact at all.” Of course, countries receiving IMF loans are generally in need of them. But a) the governor couldn’t really say much else; and b) post-conflict growth in the country has helped to build up forex reserves, possibly making the loan less of an issue than it was. Read more
Sri Lanka’s central bank staff are to become proficient in Tamil, the language of the Tamil Tigers who were until recently at war with the Sri Lankan government.
It is one of several integrationist measures taken by the bank since the conflict ended last year. Another measure was a $26m re-finance fund called Northern Revival, intended to channel business loans to the Tamil-majority North through existing banks. After a flood of applications, a new but similar initiative, the Northern Regional Development Fund, is set to receive a further $100m. It will be based in Jaffna (see map). Read more
The central bank of Sri Lanka has held the repo rate at 7.5 per cent, as the economy shows signs of returning health. Rates offered by banks to the public – averaging about 15 per cent in December – are beginning to fall, and credit became more available (in nominal terms) at the end of last year. Inflation is interesting: year-on-year inflation rose steeply from 4.8 at the end of 2009 to 6.5 per cent in January, but the annual average inflation fell to 3.1 per cent. Annual average inflation – slower to change and less affected by what happened this month last year – has fallen from 21.6 per cent this time last year, a remarkable achievement. Read more
Sri Lanka has shelved plans to allow the free flow of foreign currency into and out of the country following political upset over the plan. Sri Lankan central bank governor Ajith Nivard Cabraal said over the weekend that the plans were now on hold until after the Presidential election, scheduled for January 26, 2010.
The central bank, which yesterday kept its rates on hold, said on January 4 that it would allow the free flow of foreign exchange, so anyone could send money in or out, or set up foreign bank accounts. Read more
The state must stop reckless spending if the Sri Lankan economy is to avoid inflation, the governor warned yesterday in a roadmap address. Nivard Cabraal is quoted as saying the central bank may be forced to print money if the state continues to spend at its current rate.
The governor is concerned about the government’s recurrent expenditure, which in nominal terms reached 16.5 per cent of GDP, exceeding its target of 15.8 per cent. “Any reckless new public spending in hundreds of billions on recurrent expenditure will be disastrous to the economy and will reverse the sound macro-economic fundamentals as prevailing now, and put many businesses at intense risk,” he said. Read more
Sri Lanka’s central bank has kept interest rates unchanged in an effort to encourage bank lending and spur economic growth. Information released today shows the monetary policy committee kept the repurchase rate at a low of 7.5 per cent, having cut it by three percentage points so far this year. The reverse repo rate was kept at 9.75 per cent, having been cut by 2.25 percentage points this year.
“Still there is room for lending rates to come down and more credit growth,” Nandalal Weerasinghe, an assistant governor at the central bank, told Reuters. Read more
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
