With CPC, CEB reforms, interest rates to dip by June - Dr. PB

Treasury Secretary Dr. P.B. Jayasundera yesterday expressed confidence that interest rates would come down by June, enabling the banking sector to resume the empowering role of the economy via productive investments by the private sector.

“Several public enterprises face key risks and in the interest of the future generations, reforms are critical. Given the ongoing measures to improve the viability of CPC and CEB, interest rates should come down from May or June, thereby supporting the rejuvenation of the economy in 2013. The banks will be able to once again spearhead the revival of the economy in 2013,” Dr. Jayasundera said at the launch of the Central Bank’s 2012 Annual Report.

This view was endorsed by Central Bank Governor Nivard Cabraal as well, who noted that there was space for interest rates to come down. “Our policy measures required a downward revision though it hasn’t happened as fast as we would like to see,” Cabraal said, adding that interest rate should reflect the dynamics of inflation, which the Government is committed to retaining at single digit level.

During his speech, Dr. Jayasundera also acknowledged that managing inflation at single digit level for 50 months was unprecedented. “During my career at the Central Bank, we have claimed decline in inflation by several points as an achievement but that was at double digit levels. Therefore the Government and the Central Bank can be proud of this achievement,” he added.

The Treasury Chief also said that in 2012 there was no other country in Asia other than Sri Lanka which had made a series of tough policy measures to cushion from external and local shocks. “Criticising such measures is easy, but deciding and implementing same is a tough call. President Mahinda Rajapaksa can be commended for ensuring political stability, and as Finance Minister can be proud of having taken such measures to bring stability and strength to the economy as well as the overall performance given the challenges faced,” Dr. Jayasundera emphasised.

Given the issue of integrity with regard to statistics released by the Central Bank as well as the Annual Report, the Treasury Secretary, who also sits on the Monetary Board, said international standards had been followed. “The Annual Report is not a work entirely of the Central Bank but various stakeholders including State agencies and the private sector provide data,” Jayasundera said adding that there was no credence to have serious doubt about statistics.

Jayasundera also emphasised that relations between him and Central Bank Governor Cabraal were cordial, whilst being constructive. “We debate, but there are no private battles. When John Exter founded the Central Bank, he had valid reasons to ensure the Finance Ministry Secretary has a seat on the Monetary Board. This was not a threat to the independence of the Central Bank but ensures better coordination and consensus,” Treasury Secretary noted.