Implementation of CBSL roadmap could have brought needed macro-economic stability: Cabraal

Sri Lanka would not be facing its worst economic crisis in history in the current juncture if the Central Bank’s six-month road map was rolled out as planned, Governor Ajith Nivard Cabraal said.

Breaking his silence since the Finance Ministry announced Sri Lanka will work with the International Monetary Fund (IMF) to bail out the fast crippling national economy, Cabraal told Times of India Online that the required foreign exchange would have entered the country if his plan 
was implemented.

“Sri Lanka would not have needed an IMF programme if the actions proposed by the Central Bank to strengthen the forex cash flows had been successfully implemented, and as a consequence, the estimated forex inflows as per our roadmap, had materialised,” he told the online news platform in an exclusive interview.

Cabraal said the government should have implemented a cost-reflective price formula for fuel, electricity and gas, more than six months ago. He expressed confidence in the move bringing about macro-economic stability.

However, the move would have been a tough political call and a decision that would have been unpopular.
For the two years, 2020, and 2021, Sri Lanka lost around US$ 9 billion in tourism receipts. Workers’ remittances declined to US$ 1.5 billion. The severe contraction of the two key sources of foreign exchange inflows contributed to the significant deterioration of the external account.

According to the Governor, the economic situation and the external account, in particular, are expected to improve with the return of tourism.

“With greater inflows of forex from tourism, the liquidity in the forex market would also improve. Given that background, key utilities will also experience an improvement and be in a position to provide an uninterrupted supply of gas, electricity, and fuel supply in the near future,” he said.

Just as Cabraal, several government officials continue to expect the tourism sector to bring in the much-needed forex into the country to iron out the mounting economic issues. However, the industry continues to be hit, limiting its scope to realise its full potential.