Central Bank Governor Dr. Nandalal Weerasinghe has said Sri Lanka is on a steady recovery path and presents attractive opportunities for investors, in an interview with Bloomberg on the sidelines of the Invest Sri Lanka events in Sydney and Melbourne.
The economy has recovered strongly from the crisis and is growing at around five percent, the Governor said, having absorbed a run of external shocks including Middle East tensions and cyclone damage while holding stability.
“For anyone to benefit from the steady growth Sri Lanka has witnessed over the last three years and is expected to record over the next few years, this is the time to invest in Sri Lanka,” he said, according to NewsFirst.
He credited rupee stability, prudent monetary and fiscal policy and growing confidence in private-sector-led growth for the improved investment climate.
Oil remains the exposure
Weerasinghe was candid about the vulnerability. As a net energy importer, Sri Lanka is exposed to global oil price shocks: despite hydro, wind and solar capacity, the country still leans on thermal generation and imported transport fuel, and energy and transport carry heavy weight in the consumer price basket.
Inflation ran near two percent until March, then climbed to roughly seven percent after cost-reflective fuel pricing was applied — close to the upper bound of the Central Bank’s target range.
The Bank’s baseline assumes crude stays near US$80 a barrel through the rest of this year and into next. “If oil prices remain around that level, we can manage the situation,” he said.
He said tightening has begun to bite, with credit growth slowing and the rupee steadying after coming under pressure in April and May on fuel import costs. He also pointed to restrictions and macroprudential measures on vehicle imports and loan-to-value ratios as easing import pressure.
IMF programme
Sri Lanka has completed the fourth and fifth reviews under its Extended Fund Facility, Weerasinghe said, with the next review expected in November or December. He expects the four-year programme to be completed in full during the second half of next year, and said the IMF has described Sri Lanka as one of its notable success stories.
