The Central Bank of Sri Lanka while creating balanced macroeconomic conditions capable of generating sustained and equitable economic growth over the medium-term plans to use opportunities created by the COVID-19 pandemic to plan for the longer-term, digitally-inclusive, technology-driven sustained high growth.
Presenting the “Road Map: Monetary and Financial Sector Policies for 2021 and Beyond” Monday, the Governor of the Central Bank Prof. W. D. Lakshman noted that like many other economies globally, the Sri Lankan economy was also severely affected by the mobility restrictions imposed to limit the spread of the pandemic, particularly during its first wave within the country.
While social distancing measures dampened economic activity, causing a significant reduction in Government revenues, the COVID-19 pandemic has also offered opportunities to address some of the long-standing structural weaknesses of the economy, the Governor of the Central Bank said.
Presenting a brief assessment of the economic performance during 2020, Prof. Lakshman Sri Lanka experienced the largest economic contraction since the beginning of GDP compilation, in the second quarter of 2020, driven by disruptions during the mobility restrictions in the April-May period.
However, low levels of inflation and well anchored inflation expectations within the targeted range allowed the Central Bank to ease monetary policy to unprecedented levels to support the ailing economy, he said.
He noted that the performance of the fiscal sector during 2020 was significantly affected by the decline in Government revenue amidst the economic fallout.
The governor pointing out that the Government presented the Budget 2021 with a development orientation, to promote the domestic production economy, emphasized that successful implementation of the Government’s announced plans to reduce the budget deficit over the medium-term remains critical in ensuring macroeconomic stability and sustainability of public debt in the period ahead.
In conclusion, the Governor of the Central Bank said the Government and the Central Bank alone cannot address the severity of the challenges brought about by the pandemic and stressed that a collaborative approach involving all the stakeholders in the economy is required.
“Only with such support, and proactive decision making and appropriate policy measures, we will be able to mitigate any future challenges and uncertainties and steer the real economy and the financial sector in the right direction,” he said.
Prof. Lakshman said the Central Bank remains committed to achieving the objectives of maintaining economic and price stability, and financial system stability, thereby encouraging and promoting productive use of resources of the country.
“This would help create balanced macroeconomic conditions capable of generating sustained and equitable economic growth over the medium-term. Looking beyond the medium-term, we should make opportunities created by the COVID-19 pandemic to plan for the longer-term, for a sustained high growth, which must be digitally-inclusive, technology-driven, and environment-friendly, so that the future generations of Sri Lanka will enjoy a high degree of economic freedom, prosperity, and splendor,” he elaborated.
“The COVID-19 pandemic has delivered a strong message to all communities that achieving sustainable development goals (SDGs) should take center-stage in the post-pandemic policymaking, and the Central Bank will remain committed to performing an active role alongside the Government and other stakeholders to achieve our collective goal of shared prosperity,” the head of the Central Bank underscored.