The Governor of the Central Bank of Sri Lanka, Arjuna Mahendran last week said the government is evaluating whether to continue or scrap some of the concepts such as the ‘Hambantota Hub’ introduced by the previous government. Under the previous regime’s ‘five plus one’ hub concept to develop Sri Lanka, the district of Hambantota received special attention as it was to be transformed as the second major urban strategic hub of Sri Lanka.

“That would have required a huge capital outlay which we can’t frankly afford. I would say that it is more practical to look at the existing Colombo Harbor infrastructure and the Airport infrastructure as being a hub in the short to medium term. Hambantota can be developed perhaps with private sector investment. But, that of course will have to be renegotiated,” Governor Mahendran said in an exclusive interview with The Nation Gain last week.

Over the last few years, billions of dollars were invested into the Hambantota district for projects such as the Hambantota Port, the Mattala Rajapaksa International Airport, International Cricket Stadium, oil tank farm, bunkering terminal and the Botanical Gardens. Some of the projects in the pipeline are the Heritage Museum and the construction of a new oil refinery. There had also been proposals for a Central Business District in the Hambantota region, a Lotus Tower in the vicinity of the proposed High Income housing and chalets development while the Southern Expressway was to connect the Hambantota town.

Meanwhile, commenting on the future economic prospects for Sri Lanka, Mahendran said that he was optimistic that one big change from the past will be that international government to government lending will surge in the next few months.

“We haven’t had any of that in the last five to ten years because of the war and its aftermath and due to the foreign policy stance that was slightly hostile towards our traditional donors like the Western countries, India and Japan. We have seen that Official Development Finance has fallen to a very low level. And we want to revitalize all those avenues of funding,” Governor Mahendran pointed out.

When pointed out that the adverse aspect of bilateral funding is that it could be tied up with conditions, he said that it will not be the case with all of them as it will however be up to the government to decide on a case by case basis.
“When the Government sends a delegation to Geneva this September, you will see a sea change in approach to the whole issue of the reconciliation process, search for missing persons. All those issues will be handled in a totally different manner.”

Commenting on the prevailing trend of Rupee Depreciation against the US Dollar, governor Mahendran said, “The rupee is basically mirroring what is happening to global currencies. The dollar has been getting stronger against all the currencies in the world. In that context, the Sri Lankan rupee can’t remain strong.

We also have to make some adjustments. The rupee has depreciated by 2% which for me is minimal. The Japanese yen moved from 100 yen to 126 yen against the dollar which is a 26% depreciation”.

He further added that the Central Bank’s holding of reserves are pretty comfortable at the moment hovering around sUS$7 billion which can cover about five to six months of imports.

“But I would like to see reserves growing faster. We also have to bear in mind that our exporters are facing problems in Russia because of the Ruble crisis, in Europe since we lost the GSP+ a few years ago. These are structural issues in our export industry that we have to address. Until such time, our reserves build up will not be as fast as it should be.