Cabraal says change a reflection of success

By Cassandra Mascarenhas
Central Bank Governor Ajith Nivaard Cabraal termed the reduced forecast for 2012 as an “excellent situation” and insisted that it was a reflection of the country’s success.

Addressing a Business Leaders Forum last night Cabraal remarked, “7.2 per cent growth isn’t small. We’ve only exceeded this twice in our history. It’s not a tumbling down situation, it’s an excellent situation. We may sometimes see a little correction, which is needed, as it is for the stability of the nation.

Today’s decision was very carefully calculated as we want that dampener in order to ensure a very good path in the future.”
He termed the growth forecast a reflection of the success story of Sri Lanka, adding, “Maybe we were a victim of our own success.” He went on to say that the trade deficit became wider and the overall current account balance got into a deficit.
“When that happens take steps to reverse that because a sustainable economy is not possible unless imbalances of that nature are dealt with. The next step was to ensure that the trade deficit was turned around. To deal with import demand, increase interest rates, bring in a certain credit curtailment and make it a little more expensive and we have done all three and again it can reverse.”
He pointed out that in 2007 and 2009 the exchange rate did depreciate but bounced back and these matters occur because of a floating exchange rate. “We see this as a temporary period during which a correction will take place which is important for the country and we can make this correction because we have the space – there is a certain dampening of growth which we can afford. It is not a major difficulty. What we did was we built up the spaces which could be used in times of correction. What we are seeing today is that correction taking place.”