CCC Calls on Business Community to Support Independence of CBSL Efforts and Policy Reform
Monetary Policy Roadmap 2017 issued by the Central Bank of Sri Lanka (CBSL) this week offers an encouraging prospect for the business community in Sri Lanka. The Ceylon Chamber of Commerce is encouraged by CBSL's future plans for monetary policy, price stability, stability of the financial system and institutional reforms.
The 2017 Roadmap announced a shift in the formulation of monetary policy towards a flexible inflation targeting framework, away from the current monetary policy framework. This will be a gradual and ambitious change, but should be implemented over time. Throughout the post-independence history of Sri Lanka, the predominance of fiscal imbalances in Sri Lanka has challenged the development of independent and stable monetary policies. As new research has shown, weak financial management can derail a targeting regime of inflation, and undermine the credibility of a monetary authority.
Movements to establish an independent office of the public debt or to acquire within the Ministry of Finance can play an important role in strengthening the independence of the Central Bank, since the current conflict of interest in the CBSL Between being the banker to the government and managing interest rates must be resolved.
The 2017 roadmap announced a major shift in thinking about exchange rate management from that seen in the past. CCC supports the view that the CBSL should have greater flexibility in LKR; To be determined by market forces, but protected against unfavorable speculation. The CAC agrees with the Governor's statement that the strategy used in the past to intervene in money markets using international reserves of value is not sustainable. This strategy not only caused severe depletion of reserves, but the overvaluation of the LKR hurt the competitiveness of our exports. However, CCC recognizes that the government should consider the impacts of a flexible LKR on imports of essential products. Concerns about the cost of living derived from this must be addressed without resorting to the artificial defense of LKR.
The Ceylon Chamber of Commerce welcomes the efforts made by the Governor of the Central Bank and his team to put more emphasis on advanced analysis and forecasting tools to continuously enrich the decision-making of monetary policy . In addition, the institution, like the bank regulator, to improve surveillance and early detection of risks, support Sri Lanka's ambitions to become a reliable and stable regional business center. The CAC is interested in working closely with the CBSL to modernize regulations affecting our members' international business operations, particularly with respect to control and foreign exchange operations in the digital economy.
Ongoing and planned actions announced in the 2017 roadmap, if implemented in a timely and consultative manner, can help build the confidence of all stakeholders in the CBSL, position Sri Lanka as a strong economy and Resilient and create a stable and conducive environment for business to prosper macroeconomic environment. CCC calls on all stakeholders to support the CBSL's plans in the 2017 Roadmap and the Governor's efforts to successfully implement these plans.