Central Bank of Sri Lanka is targeting to maintain the inflation in the range of 4-6 per cent, P. Nandalal Weerasinghe, Governor of Central Bank of Sri Lanka has said.

This, according to him, will be an incentive for the manufacturers to produce more goods. At present, the inflation rate in Sri Lanka is 30 per cent and it will be increasing to 40 per cent in next two to three months.

He was speaking at a session organised by the Cochin Chamber of Commerce and Industry and Kerala Management Association which discussed on the current Sri Lankan economic situation and Central Bank’s future measures to overcome it.

Balance of payment crisis

He pointed out that the inflation in his country is extensively high and is experiencing balance of payment crisis as a result of which the value of Sri Lankan Rupee is depreciating at very high rate. At present Sri Lankan Rupee is valued Rs 360 for a dollar which was Rs 200 couple of months before.

The major reason for inflation is twin deficit (physical deficit and current account deficit) during the past three decades which made it to borrow money from World Bank and External Markets in commercial terms resulting in higher external debt, he said.

The mistake the government did in 2019 was to decrease taxation in high rate when the expenditure rate was still on the higher side. This has led the government to borrow more money from external commercial market. By the course of time, international rating agency rated Sri Lanka to CCC category, which turned as a barrier for the government to borrow further to meet the current expenditure, he said.

Sri Lanka will overcome the economic crisis with the assistance from the global partners, multi-level institutions and with updated monetary policies from Central Bank of Sri Lanka. The country is seeking monetary support from International Monetary Fund and is expecting debt relief and time extension for clearing debts from the external markets, he added.

K. Harikumar, President of the Chamber welcomed the gathering.

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