As Sri Lanka has reached middle income status, borrowing money on concessionary rates is not possible.
“Our borrowings are much higher and debts are high as well. Therefore, this is a different paradigm. Volatility in the system which was low has now increased,” Governor Central Bank, Dr. Indrajit Coomaraswamy said in Colombo last week.
Sri Lanka needs US $ 350 million by April this year to meet its Sovereign debt obligations. The State banks are in negotiation with banks in China, India and other Middle Eastern countries. Presenting the twelfth road map which articulates the broad direction of economic policies which ultimately contribute to the overall economic development of the country and the improvement of living standards, he said that the Central Bank does not encourage short term volatile capital flows in to the system.
“In terms of quality of reserves, we are in a much better position at present. The country has more stable money to meet debt obligations. With prudent policies, things are coming in to place. Sri Lanka could expect a better year due to reduced oil prices and reservoirs being full to enable increased output for seasonal agriculture,” he said.
The Central Bank maintains policy Interest rates. The rupee depreciation for the year stands at 16 percent.
There was no political push to appreciate the exchange rate and for Sri Lanka to reduce the threshold for foreign investment in rupee denominated securities.
The Central Bank will introduce a cost reflective alternative benchmark interest rate which will be based on the marginal cost of the banks.
Commenting on the upcoming budget, the Governor said that he is not optimistic or pessimistic, but hopes that the government will be realistic.