Written by Tharushan Fernando
31 Aug, 2016 | 9:28 pm
Speaking at a media briefing held at the Central Bank of Sri Lanka on Tuesday, Governor Dr. Indrajit Coomaraswamy commented on Sri Lanka’s economic situation.
The CBSL Governor stated that since the country’s economic situation is facing volatile capital flows, it becomes very important that the country does not enter the ‘category of so called twin deficit countries’ which are countries with a budget deficit and a balance of payments current account challenge.
The CBSL Governor explained that this category would mean that the country is more vulnerable -and Sri Lanka has been in this category and probably still is – but the insurance the nation has is the IMF programme.
He further pointed out that if the market perception is that the country is broadly on track with the IMF programme then there should be sufficient confidence in the economy.
“These things you can’t predict”, he said, noting that markets can behave very irrationally, but the IMF programme is very useful at this point because again, its signalling effect will be helpful in trying to manage these possible negative consequences of the rate.
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