Central Bank steadfastly faced all intrigue - Governor testifies before LLRC

• Says mega private sector investments coming to North

By Deepal V. Perera

Central Bank Governor Ajith N. Cabraal testifying before the Lessons Learnt and Reconciliation Commission said yesterday that mega type of private sector investments were expected to come up in the northern region at the conclusion of the government infrastructure development activities in the region.

“We would like to see mega projects come to Jaffna soon. It takes time to implement big projects in the region because it entails the investment of a lot of money, and the expectations of the investors too are high. They look into many aspects such as sound infrastructure and other factors before investing. Now things are favourable and we are getting more and more investor enquires like never before. I am sure that year 2011 will be the year that will bring mega investments to Jaffna”, said the Governor.

He said the war  brought destruction to the  country and stressed  that the Central Bank itself was a victim of the conflict where 41 of its staff members  perished when terrorists carried out  9/11 style suicide attack on the bank on 31January 1996 killing well over a hundred people during the attack.

Speaking on how LTTE collected funds for its activities the Governor said that funds raised locally was mainly to support the fighting cadres and to buttress the local administration of the LTTE.

“Their main source was illegal taxes in many forms and levies on goods, persons, and activities, and they also had very efficient and ruthless system of tax collection. The LTTE also operated its own Central Bank in Kilinochchi. The funds collected internationally were used to buy military hardware, to support massive misinformation campaign and to buy foreign and local thought leaders, influential persons and opinion makers,” he said

Commenting on the decision taken by the government to crush the terrorists by the use of force the Central Bank governor pointed out that from the year 2006 to 2009 the Government’s defence expenditure totalled Rs.605 billion (US$5.5billion) which was equivalent of the 4% of the GDP.

The final result was that Sri Lanka emerged as the first country to defeat terrorism showcasing that the country had been able to expand its resources in an efficient and productive manner.” he said.

He also said that the total government expenditure for the year 2009 was Rs.1,202 billion (US$10.6billion) with a total of about 1,200,000 government servants including the armed forces.

“This sum is less than the training cost of 47,000 troops by the U.S. in the war in Afghanistan,” the governor continued.

Commenting on the economic benefits that the country achieved post war the Central Bank governor said the country achieved a high economic growth trajectory of 8%.

He said that the economy was boosted by efficiently allocating economic resources.

Pointing out on how international pressures led to the destabilisation of the economy the Cabraal said that economic aid and concessions with politically motivated conditions could have led to instability of the economy in the medium and long term levels.

“Many so called economic interventions attempted to indirectly pressurise Sri Lanka to halt or dilute the final humanitarian effort. The threat of withdrawal of GSP+ concessions  at sensitive times and delay in the approval of IMF –SBA is the best example” he said.

The Governor also said that the massive global mis-information campaigns were carefully designed to affect the country’s economy, funding sources, cost of borrowing and country ratings.

“Massive effort had to be launched and maintained to convey the positive features of the economy. Even in the future these efforts have to be continued in the interests of economic stability,” Cabraal said.

Commenting on the successes achieved the governor pointed out that international bond issues of the country were over subscribed, without any fall-out from GSP+ withdrawal. The country ratings were maintained and recently upgraded, investor sentiment maintained even in the most difficult times and the removal of the war risk  premia and relaxation of travel  advisories are notable achievements during the  period.

Giving evidence on how the banking sector responded to the new found peace in the country especially  in the North and Eastern Provinces the Governor said the Central Bank took the lead in  re-establishing of  banking services in these areas.

One of the first steps that we took was the establishment of the two provincial offices  in these areas to facilitate  loans schemes  operated by the  bank. To date I have been to Jaffna 11 times,” concluded the Governor.