Govt. needs to urgently foster growth: Cabraal

Ajith Nivard Cabraal – Pic by Shehan Gunasekera 

• Says Yahapalanaya has failed to deliver on economic promises 
• Insists reforms needed urgently to push up growth and support markets 
• Warns lending rate caps could result in distortions
• Disagrees with proposed amendments to monetary law to prevent excessive money printing  
• Supports fresh investigations into bond scam by new Govt.
• Says those responsible should be “named and shamed” 
  
   

By Uditha Jayasinghe  

Former Central Bank Governor Ajith Nivard Cabraal yesterday called on the Government to fast-track economic reforms to improve economic expansion, warning that failure to do so could push growth to historic lows. 

Cabraal, speaking to reporters at the Sri Lanka Podujana Peramuna (SLPP) headquarters, insisted that growth had suffered since 2015, and could slip to as low as 1.5% in 2019, unless the Government steps up efforts to galvanise the economy. 

The Central Bank has projected Sri Lanka’s growth to be 3% this year, and growth was recorded at 3.7% in the first three months of the year by the Census and Statistics Department. Growth numbers for the second quarter are yet to be officially released.

Nonetheless Cabraal dismissed official data as being “doctored”, and stressed his observations were that the economy will grow at a much slower rate than official projections. He also faulted the Government for not implementing policies to foster growth in the last four years, and stated the public was suffering as a result. 

“The Prime Minister recently said he has revolutionised the economy, but when you look at interest rates, slow growth of per capita income, high levels of borrowing, ease of doing business and many other indexes and data, you can see that there hasn’t been any real growth. Companies are seeing slower profits, the stock market has performed badly, money is flowing out of Government securities, there is no foreign investment, and the rupee is depreciating again. So we are asking for a true revolution. One where money will flow to the people, and they can experience tangible growth of the economy,” he said. 

Cabraal warned that placing caps on lending interest rates could be distortionary and lead to unforeseen consequences in the financial system. He also disagreed with plans by the Government to amend the Monetary Law Act to prevent excessive money printing by the Central Bank, insisting that it was necessary “leverage” for a Government. 

“We are coming out and speaking publicly, because we are concerned about what we are seeing. We are not happy that our predictions are coming true. We want the Prime Minister and the Cabinet to take steps to rectify this situation, so that the public can benefit. When you talk to anyone these days they all complain they have no money, businesses cannot invest because interest rates are too high, foreign investors are not coming to Sri Lanka because they are concerned about policy consistency. This is not what the Government promised when they came to power.”        

Responding to questions, the former Governor said he would extend his full support to any new investigation into the controversial Central Bank bond scam that took place in February 2015, insisting that a credible and independent investigation is yet to take place. 

“I would absolutely support a new investigation into the bond scam. There hasn’t been a proper investigation into it, and I believe it is the greatest cover-up. I have worked hard to reveal information, and I want to personally become involved in getting to the bottom of what happened. The people responsible should be named and shamed.”