Managing appropriate Economic Balance Crucial – Cabraal
By Rajiesh Seetharam
Balancing the economy is vital during a pandemic situation, stated State Minister of Money and Capital Market and State Enterprise Reforms, Ajith Nivard Cabraal, at the 41st Chartered Accountants (CA) annual conference held on Monday (18).
To ensure macroeconomic fundamentals remain stable during the pandemic period, we had to maintain exchange rate stability, keep interest rates lower to encourage business activities, debt, reserves and fiscal deficit at sustainable levels while rolling out stimulus packages, noted Cabraal.
“Importers, people remitting money want the rupee to appreciate, while exporters and others repaying debts want it to depreciate.
“Providing stimulus would affect the fiscal deficit, utilising reserves to keep the rupee stable would mean that reserves would go down. These are all competing interests. The difficult part is to get the balance right.”
Cabraal said due to the prompt action taken by the government during the COVID-19 crises, the economy is back on track which is reflected in the performance of the Colombo Stock Exchange.
“I was always of the view that we shouldn’t wait for foreigners. We had 10 trillion rupees in deposits in various banks, which could be used for investments in markets. Globally Colombo Stock Exchange is one of the best performing markets in the past few months, mainly due to retail participation which has proved the fallacy that the Sri Lankan market doesn’t have depth, or is a weak market. At the same time, we hope foreigners will enter what is now becoming a growing market. In the meantime, Sri Lanka can move to the next phase of development where Sri Lankan Markets will provide capital to businesses.”
State Minister Cabraal said that we need to aim at a 150 billion dollar economy and a USD 7000 GDP per capita for which massive amounts of investments are necessary. “We are developing the necessary frameworks like reforming the state sector; governance system, infrastructure, and framing new laws for people to come and invest safely. The Colombo Port City and Hambantota Industrial Zone are open for investments, new laws are being framed to attract investments. Chartered Accountants have a role to play in attracting investments by talking to investors to explain the opportunities that exist”, he said.
Cabraal pointed out that while many thought it was safer to continue with the lockdown, it wasn’t feasible as the economy would have suffered. “With a 66-day lockdown, we suffered a 16% reduction in economic activity during that quarter. But post opening, the economy is growing again”.
During his speech, Cabraal said that from 2006-14 the government navigated through difficult times with a civil war in the country, 2008 global financial crisis, banks crashing all over the world, oil prices reaching USD 145 a barrel. Similarly he expressed confidence that the government will be able overcome the challenges brought on by the pandemic.