Home / Business/ CB Chief says extent of disruption to economy from attacks depend on how soon stability returns

CB Chief says extent of disruption to economy from attacks depend on how soon stability returns

Comments / {{hitsCtrl.values.hits}} Views / Monday, 29 April 2019 00:46



The Easter Sunday bombings “clearly” had an impact on confidence and sentiment, but the extent of disruption likely depends on how quickly the Government can stabilise the situation, says Central Bank of Sri Lanka Governor Indrajit Coomaraswamy. 

Central Bank of Sri Lanka Governor Indrajit Coomaraswamy

In an exclusive interview with CNBC, Coomaraswamy said the Central Bank forecast the economic growth to be between 3.5 -4% this year before the unfortunate Easter Sunday attacks.

“We thought that there were sufficient grounds for pick up the growth from the 3.2% last year. The tourism sector was doing very well. Industrial sector, particularly industrial exports were buoyant. The 16% depreciation (of rupee) last year clearly helps. There were number of pockets, like IT industry where we were seeing buoyancy in the economy,” he said.

The Governor said it’s far too early to say to what extent these events would have an impact on the economic growth. “Clearly it would have an impact on confidence and sentiment. But I think the extent of disruption would depend on how quickly the Government can stabilise the situation.”

“If one is able to bring normalcy and also to give confidence to the people and the businesses that the situation is under control, then it is possible that the impact can be contained,” he said.

According to the Governor of the Central Bank, the tourism sector will be the most affected in the short term. He pointed out that the tourism sector has a number of supply chains attached to it, such as the agriculture sector, services, handicrafts, transport, leisure activities and transport and all these will likely to be affected.

Tourism sector, which is roughly about 5% GDP has a seasonality. In terms of tourist arrivals the peak time is November through March and in the months of May and June arrivals are low.

“The fact that we are going to the off season, we have to mitigate the effects to some extent. It again depends on how quickly we can stabilise the situation and give confidence both to Sri Lankans and to visitors. If by November we have stability in the country, then the disruption may not be significant,” Coomaraswamy explained.

When asked whether the Central Bank will choose to intervene if the rupee becomes under pressure, the Governor said the Central Bank will not be defending a particular rate and will manage the rate to be flexible.

“In an inflation targeting framework, the exchange rate is the first line of defense. It has to be flexible to take on shocks, to adjust to shocks. So we will manage the exchange rate flexible. We will not be defending any particular rate.”

However, he said the Central Bank will intervene to prevent disorderly adjustment.

“In the last couple of days we have intervened a little bit in the market to ensure that this unexpected shock does not disrupt the forex market and that the exchange rate does not move in a way that it is misaligned with the underlying fundamentals.”


Share This Article

Facebook Twitter


1. All comments will be moderated by the Daily FT Web Editor.

2. Comments that are abusive, obscene, incendiary, defamatory or irrelevant will not be published.

3. We may remove hyperlinks within comments.

4. Kindly use a genuine email ID and provide your name.

5. Spamming the comments section under different user names may result in being blacklisted.


Today's Columnists

“Sri Lanka’s future lies in producing exportable manufactured goods”: Dr. Howard Nicholas

Monday, 22 July 2019

Drawing lessons from Vietnam’s experiences The Sri Lanka-born economist attached to The Hague based Institute of Social Studies – Dr. Howard Nicholas – addressing a packed audience consisting of the alumni of the Postgraduate Institute of Manag

We should sell our water

Monday, 22 July 2019

When you read the title of this article, you will probably feel disgusted with me as selling our water has been a controversial topic since a long time ago. By the way, I am talking about virtual water trade and you would be surprised to know that we

A voice of compassion amid howls of zealotry

Monday, 22 July 2019

The unrestrained freedom extended by the current regime to a bunch of saffron-clad street vendors of Sinhala Buddhist zealotry is pushing Sri Lanka once again into a cauldron of ethnic and religious convulsion. The nationwide spread and virulence of

Roger Beteille: The man who reinvented the commercial airliner

Monday, 22 July 2019

The visionary engineer, pilot and manager who led Airbus to some its most significant decisions, passed away last month. Beteille, who was the head of French aircraft manufacturer Sud Aviation’s flight testing section, was made technical director

Columnists More