Colombo, Nov 15 (PTI) Key economic policy adjustments made by Sri Lanka’s central bank have averted an economic crash landing in the ongoing economic crisis in the country, the governor of the apex bank Nandalal Weerasinghe said on Tuesday.
Weerasinghe told a seminar held here that some stability has been restored in the debt-ridden island nation hit by the worst economic crisis since its independence from Britain in 1948. “We have reached some sort of stability.” “Only reforms can lead to solutions,” the governor stressed, hailing the 2023 government budget that was presented by President Ranil Wickremesinghe on Monday.
The budget aims to increase tax collection by raising taxes by over 60 per cent.
Weerasinghe said the budget was required to look at what reforms were needed to ensure economic stability.
Commenting on the road to the economic crisis, Weerasinghe said the central bank was keeping the exchange rate at Rs 203 to the dollar by spending reserves. “We used the reserves to pay debt and pay for fuel imports.” “When it was becoming clear it was not sustainable, the bank decided to float the exchange rate leaving the rupee to fetch 365 to 380 to the dollar.
“We have been printing money and it caused inflation to rise. Then we had no option but to tighten the monetary policy. We next reduced money printing and started to implement measures to raise revenue,” Weerasinghe explained.
“If we had not taken those macroeconomic measures the situation would have been much worse.” On the debt restructuring talks to obtain the International Monetary Fund (IMF) facility, Weerasinghe said: “We expect relief from creditors but in order to convince them to share the pain we also have to show them that we are taking a share in the pain as well.” “The next crucial step is to get financing assurances and the IMF programme and additional financial support so Sri Lanka can eventually return to a growth path,” Weerasinghe said.
“The economy cannot be reformed overnight. That is a painful process. The next challenge is to implement the budget according to a timeline,” the governor added. PTI