Mapping the path ahead

Central Bank Governor Dr. Indrajit Coomaraswamy this week delivered the presentation of the Central Bank’s Road Map for 2017 and beyond stating that the economic stability in the country was broadly on track. However, the Governor, to no one’s surprise, also pointed out that a great deal of work had to be done to make sure the growth in the country was both fast-paced and inclusive.

The Central Bank, according to Dr. Coomaraswamy, has improved macro fundamentals through budgetary policies that have set the country on track to rapid growth. Under the ruling government, it has also had its share of controversies and troubles – the Bond scandal being chief amongst its predicaments. It was perhaps fitting that the Governor pointed out the importance of discipline in stabilising the economy. The need for discipline should be applied not only to politicians, public servants and businesses, but also to citizens. As politicians and policymakers must be on the same page in terms of cohesive reforms on macro fundamentals, productivity and business environment, consensus must also be built with the public, as recovery from years of financial mismanagement is surely set to be painful in the immediate future. This however does not mean that the burden must fall squarely on some sections of the public, as seen by some analysts, while the political classes receive better perks and bigger allowances.

Even though the Government believes that overall development is on track, it is also aware of the issues of income disparity and regional poverty. Although overall poverty has reduced to below 7% of the population, pockets of extreme poverty remain and income inequality rises. The Government has declared this year the year of alleviating poverty but much work needs to be done in order for that to become a reality.

This brings us to the strides the country has made in terms of improving rule of law, transparency, stamping down on corruption and establishing democracy over the last two years. Public opinion on the degree of change has varied but change has undeniably taken place and it is time to make it meaningful. It is in this environment, which should on paper be more conducive to business, that domestic private sector participation will become vital.

The Central Bank will also look towards a constructive restructuring process which will lead to reforms in Monetary Law and Banking Acts and will endow the Central Bank with greater powers to regulate the financial system. As the Governor mentioned in his presentation, this is aimed at improving the credibility of the Central Bank as well as preserving its independence – something that has been called into question of several occasions in the past. A stronger, more independent Central Bank would in turn lead to business confidence in Sri Lanka growing, improving its image as a foreign investment destination.

As the Governor pointed out, Government policymaking needs to be practical and proactive with less of an emphasis on short-term political gains and a clear focus on the country’s long-term future. Although implementing such policies may not always garner the kind of public affection that our current political fraternity prioritises so highly, making the tough choices and selling it to the public is perhaps the sign of a tactful and progressive government. The kind of government required to drag Sri Lanka into rapid and inclusive development.