Political Stability is a prerequisite for economic development : Central Bank Governor

Political Stability is a prerequisite for economic development Central Bank Governor Dr. Indrajit Coomaraswamy said today.

Restoring political stability and avoid deviating positive macroeconomic, policy and growth achievements    are particularly important urged Governor Dr Indrajit Coomaraswamy.  He made these remarks during the inaugural session of the launch of the Development Process for Sri Lanka's National Financial Inclusions Strategy.

"Restoring political stability is particularly important at this time because I think, and I hope I am not being overly optimistic, but I think we were beginning to see some progress in the positive direction," Coomaraswamy said.         

"The elephant in the room is the political situation in the country. I am not aware of any country that has made significant economic progress without political stability. So the restoration of political stability is of paramount importance," he said.

''Sri Lanka was seen making progress in terms of macroeconomic fundamentals. Sri Lanka's headline inflation soared to over 7 percent in 2017, but has since slowed to 4.5 percent and is expected to range between 4 to 6 percent in 2018. Foreign exchange reserves grew to 7.97 billion US dollars by the end of 2017, from 6 billion US dollars a year earlier. Progress was also seen in developing policy frameworks for long term sustainable growth" governor mentioned.

"This is reflected in the fact that we had a record year for exports, from a very low base and I must admit there is nothing to write home about that. Our exports are still far too low, but it was a record year. 
"The same applies to FDI and inflows to CSE. The overall levels are still too low but we are moving in the right direction. So it seemed that things were coming together and we were moving in the right direction," Coomaraswamy said. 

"The important thing now, is to stay on track. The government should have done many things quicker, that's for sure. Things have gone too slowly, but this is not the time to deviate," the Governor warned. 
The Department of Census and Statistic is expected to release 2017 GDP growth data soon, and Governor Coomaraswamy predicts it will be lower than expected. 

"Sri Lanka should now guard against the danger of going for short term expedient solutions to push up the disappointing growth rate," he said.

"The important thing is to work on a framework that will deliver sustained growth by exports. 
"For a market of 20 million people external demand plays a major role in terms of providing sustained growth in the long term''.   

After his remarks on economic performances he stated the importance of the financial inclusion.

 '' Financial Intervention is the lifeblood of economic activity. So access to financial services is a key determinant of life chances of people. This makes a National Financial Inclusion Strategy, a key platform for achieving inclusions and regionally balanced growth and development. This reinforces the importance of the Development Process we are launching today".

When comparing with the comparative countries Sri Lanka's Financial Inclusion is way ahead, governor added. Successive governments and Central Bank has done many things to uplift the Financial Inclusion Governor said at last.

'' All these efforts have had a positive impact in terms of financial inclusion in the country. Today, Sri Lanka has a wide range of financial service providers, offering high levels of physical access to branches. Currently, bank branch density of Sri Lanka is at 18.6 branches per 100,000 adults, while bank branches are spread throughout the country. Moreover, 83 per cent of adults have accounts at a financial institution. Another encouraging fact is that same percentage that is 83 per cent of adult women also have an account at a formal financial institution unlike in many comparative countries''.

Image Courtesy Reuters