Brexit would not create any significant adverse impact on the economy of Sri Lanka, according to Indrajit Coomaraswamy, the newly-appointed Governor of the Central Bank of Sri Lanka (CBSL).
Answering a question by The Hindu at his maiden press conference on Tuesday, Dr. Coomaraswamy, who took charge as the 14th Governor of the CBSL on Monday, said the country might lose a “little bit” of its exports to the United Kingdom, which accounts for about 10 per cent of Sri Lanka’s total exports.
The loss might be due to depreciation in the value of the Pound. There might be a “negative hit” in tourism. As for imports, “I do not think we import great deal [from the UK] but if we import, it will be cheaper.”
Pointing out that none of these aspects were major, the Governor, who had served the Commonwealth Secretariat for 18 years, emphasised that “it is not going to shift the needle.” However, he added that, if any country, not just Sri Lanka, decided to go to the UK market, “the terms are likely to be higher than they would have been if Brexit wasn’t there.”
Identifying the main challenge before the CBSL, Dr. Coomaraswamy pointed to the importance of putting in place policies that would give “sustained stabilisation” of the economy. This was what Eastern and South East Asian countries did.
Making a review of the approach adopted by Sri Lanka in the last 40 years, he said there had been “repeating cycles of stop go” policy. “We would start implementing [economic] stabilisation programmes but never we see [them] through.”
He explained that the “most disappointing part of the post-conflict [civil war] narrative” was the performance of investors, both domestic and foreign.
“We have not been able to create an environment which has increased investment.” In a country such as Sri Lanka which did not have a “large domestic market and large amounts of strategic materials,” domestic investment should have taken off first. “The fact that domestic investment has a flat line is an indication that our investment climate has not been as good as it should have been because of macro economic fundamentals and other factors related to the climate.”
Yet, Dr. Coomaraswamy sounded optimistic and said that in the last few months, there had been a “shift in the positive direction.” Stabilisation measures were being carried out to get the budget into order, apart from revenue generation measures. The CBSL had tightened monetary policy and allowed exchange rate to float a “little bit. I think we are on the right track. We have to sustain it,” he said, hoping that a five-year economic plan, to be unveiled by Prime Minister Ranil Wickremesinghe shortly, would have a “cohesive and coherent” framework for structural policies.