Confidence key to economic management: Cabraal

Wednesday, 6 July 2011 01:33 - - {{hitsCtrl.values.hits}}

By Uditha Jayasinghe

Confidence is key to managing financial and monetary systems, said Central Bank Governor Ajith Nivard Cabraal.

He made this statement while delivering the keynote address at the opening ceremony of the seventh SEACEN-ABAC/ABA/PECC Public Private Dialogue for the Asia Pacific Region that was held yesterday morning. The seminar was titled ‘The Impact of Global Financial Reforms and Challenges for Asian Emerging Markets’.

He insisted that those entrusted to manage economies needed to have confidence in the systems that they use, for otherwise no one else would follow the regulations that are laid down.

“Financial markets depend on confidence and we must focus on this first principle. We must believe in the systems that we use for otherwise we cannot expect others to do so,” he said, adding that risks in emerging markets needed to be closely monitored.

Insisting that the main thing that had been learned from the global financial crisis was that not enough had been learned, he stressed on the importance of finding the core reason behind the events that spurred the global financial crisis.

“We must also ensure that the solution is not worse than the crisis and that it does not set the foundation for an even bigger problem in the future,” he cautioned.

Calling stability a “process” rather than an “event,” he insisted that market managers needed to work towards stability over a long period of time. Policy should be formulated with this in mind. “A team should be appointed to undertake the task of finding lapses within the systems and taking steps to deal with them before it evolves into a crisis.”

This response should also be flexible and able to adjust to challenges. He called on the delegates to look at the Sri Lankan economy and see how the Central Bank had built buffers so that there was room to manoeuvre in a crisis. “The shock absorbers must perform well, otherwise when you fall into a rut you will feel uncomfortable.”