Economists informed that new Central Bank of Sri Lanka (CBSL) Governor Dr. Indrajith Coomaraswamy could take certain decisions to bring about stability in the performance of the economy.
Whilst highlighting that there were fundamental problems and weaknesses in the economy which were beyond the Governor’s control, Head of the Department of Economics of the Faculty of Arts of the University of Colombo, Prof. W. Wimalaratana Thera remarked that Dr. Coomaraswamy’s decisions could cushion the impact of them on macroeconomic stability.
Pricing stability whereby inflation is kept at a low is essential along with the maintenance of growth, reduction of the budget deficit, external imbalances and unemployment, and bringing about stability in the rate of exchange, he noted.
In the practical situation, Dr. Coomaraswamy may be forced to make unwilling decisions when faced with circumstances such as for example when the external imbalances are maintained for a long time, the external value of the Sri Lankan Rupee would go down, he mentioned, adding that still for all exporters may decide to bring back proceedings.
“In market economies, in addition to real factors, there are psychological factors at play. Dr. Coomaraswamy will have to play a key role in the monetary policy even though this is not something he alone can do. There is the Monetary Board, proposals by the Government and profits envisioned in the budget. All this is interlinked,” he said.
“International changes like the Brexit and regional changes and locally, natural disasters too will have an influence on macroeconomic stability as a whole. Stabilizing the economy is the main responsibility of the CBSL,” he observed.