Bouquets and brickbats for CB’s 2014 Road Map

Tuesday, 7 January 2014 00:46 -     - {{hitsCtrl.values.hits}}

By Cheranka Mendis The Central Bank’s Road Map for 2014 yesterday received both bouquets and brickbats at a top level discussion hosted by the Ceylon Chamber of Commerce and the Daily FT, involving Governor Nivard Cabraal and private sector experts. Business leaders and an economist noted that while the Road Map outlined the way forward for Sri Lanka’s march, there were a few crinkles that needed to be ironed out first. The annual Road Map, brainchild of Governor Ajith Nivard Cabraal is a flagship annual policy presentation and its eighth edition was launched on Thursday at the Central Bank. At the well-attended Forum held at the Ramada Hotel, the Governor in a presentation spanning nearly an hour outlined some of the salient achievements in 2013 as well as since 2009 in addition, to what is planned and projected for the 2014 and beyond. Panellists Aitken Spence Deputy Chairman and Managing Director Ranjan Brito, NDB Chief Executive Officer Rajendra Theagarajah, Insurance Association of Sri Lanka President Prakash Schaffter and former Central Bank Assistant Governor Dr. Anila Dias Bandaranaike acknowledged that the vision and concept of the Road Map was well thought out and had the potential to strengthen the country’s financial base, while conceding there were concerns that could affect the forward march of the country’s economy. Central Bank Chief Cabraal said the country had made considerable progress since 2009 and there was a clear focus and a plethora of initiatives and policies to become an upper middle income nation enjoying over $ 4,000 per capita income by 2016. He said that from 2014 onwards the Central Bank would step up its activities and complement the Government’s efforts to avoid the middle income trap. Brito identified the Road Map as a perfect platform for business both local and foreign. “The Central Bank means business with the Road Map,” he said. The Road Map has a clear articulation of where factors important to investors – interest, inflation and exchange rate – are heading in 2014. Several other components of the Road Map were also commended. However, Brito expressed concern over whether the envisaged low interest rate regime could lead to overheating of the economy as was seen in the recent past whilst there was still some doubt over the actual downward movement in interest rates in the medium term. Lack of skilled labour as well as likely external shocks, he said, were threats to achieving some of the goals set by the Road Map. Theagarajah welcomed measures announced in the Road Map on consolidation of banking and non-bank financial institutions, but called for greater understanding on the part of staff and boards of these institutions for mergers and acquisitions and their synergies. He suggested that greater consolidation was welcome, but dangers of asset stripping as well as a pickup in the economy to absorb extra assets in combined institutions were also highlighted. Schaffter noted that the growth envisioned by Road Map was favourable to the insurance industry “Economic positives of the Road Map are good for the industry,” Schaffter said, “High growth, low inflation seems to be a fantastic place to be in,” he said, despite noting that a low interest rate regime also means challenges to the insurance industry in terms of management of long term funds. Making the discussion livelier, ex-Central Banker Bandaranaike maintained that whilst much has been achieved in the post-war era, original targets set a few years ago haven’t been realised. “That shows where we as a country could have been by now,” she said, referring to high GDP growth and investment targets set for 2013 in 2009 and 2010. “Even though there is no denying the country’s post-war progress, there is no need to harp on about what the Government has done. Having said that, it seems to me that there is so much excitement and hype about good things happening, that some areas are getting a little neglected. We are still not performing at the level we want to be performing. We shouldn’t be complacent about the positives; we need to put achievements in context but remember we would like to do better,” Bandaranaike said. “If you put everything in the most positive light, you lose credibility,” she added. Governor Cabraal responded to some of the suggestions as well as criticism by maintaining the Central Bank perspective. In a witty remark, he said: “Some are gung-ho when targets are achieved, but others are gung-ho when targets are not achieved.” The full report on the Forum will be published tomorrow.