By Dilina Kulathunga
Despite the Central Bank being an independent body, Governors of Central Banks cannot act in a tunnel vision purely focusing on economic fundamentals ignoring the political scenario of those countries, the Governor of the Central Bank said last week answering a question on the feasibility of adopting a formula for the revision of petroleum prices reflecting market fluctuations.
“We must realise that we do not live in a pure economics world. This is a world of politics and economics and therefore every economically sound decision may not be politically viable”, CBSL Governor, Ajith Nivard Cabraal pointed out.
Addressing the media following the presentation of the 2011 Annual Report, the Governor further noted that although that as the governor of the CB, he totally endorsed such a formula in place, it was important to understand whether our people were prepared to go to the filling station not knowing how much they would have to pay for a liter of Petrol the following day.
“Unfortunately it doesn’t work that way always everywhere and that is why we need to strike the correct balance between economics and politics in making such policy decisions”, he said illustrating how difficult it was in the neighbouring India to increase price of fuel by as little as Rs. 3 to Rs. 4 as it was strong enough for a regime change.
He further acknowledged that although he himself had so many discussions with the government authorities on matters which are economically significant, these discussions are not shared to the general public always as there was a clear demarcation as to what is and what is not published.
Responding to criticisms levelled against the secretary to the ministry of finance, Dr P. B Jayasundara and himself on mismanaging the economy by several sections of the economy, he asked whether the achievement of the highest growth rate of 8.3% in 2011 in the history of Sri Lanka a crime.
“Last year has been a historic year for Sri Lanka since liberalisation with many achievements in our economy. We had the highest gross official reserves of US $ 8.2 billion by mid August 2011, above 8% growth for two consecutive years, lowest inflation for the past 38 months and the lowest unemployment rate of 4.2% among others”, he added refuting those allegations.
During the latter part of 2011 the 3% Rupee depreciation was criticised as ‘too little too late’ but since last February the criticism of the policies were of ‘too many, too late’ questioning the consistency of the economic policies which creates an uncertain environment for the stakeholders to consider decisions.
Responding to these latest developments the governor said that those were not ad hoc decisions but were judgmental calls which were taken at right times because the CB had a clear vision unlike many others who found fault with everything but could not be held accountable for what they said.
Despite the Central Bank being an independent body, Governors of Central Banks cannot act in a tunnel vision purely focusing on economic fundamentals ignoring the political scenario of those countries, the Governor of the Central Bank said last week answering a question on the feasibility of adopting a formula for the revision of petroleum prices reflecting market fluctuations.
“We must realise that we do not live in a pure economics world. This is a world of politics and economics and therefore every economically sound decision may not be politically viable”, CBSL Governor, Ajith Nivard Cabraal pointed out.
Addressing the media following the presentation of the 2011 Annual Report, the Governor further noted that although that as the governor of the CB, he totally endorsed such a formula in place, it was important to understand whether our people were prepared to go to the filling station not knowing how much they would have to pay for a liter of Petrol the following day.
“Unfortunately it doesn’t work that way always everywhere and that is why we need to strike the correct balance between economics and politics in making such policy decisions”, he said illustrating how difficult it was in the neighbouring India to increase price of fuel by as little as Rs. 3 to Rs. 4 as it was strong enough for a regime change.
He further acknowledged that although he himself had so many discussions with the government authorities on matters which are economically significant, these discussions are not shared to the general public always as there was a clear demarcation as to what is and what is not published.
Responding to criticisms levelled against the secretary to the ministry of finance, Dr P. B Jayasundara and himself on mismanaging the economy by several sections of the economy, he asked whether the achievement of the highest growth rate of 8.3% in 2011 in the history of Sri Lanka a crime.
“Last year has been a historic year for Sri Lanka since liberalisation with many achievements in our economy. We had the highest gross official reserves of US $ 8.2 billion by mid August 2011, above 8% growth for two consecutive years, lowest inflation for the past 38 months and the lowest unemployment rate of 4.2% among others”, he added refuting those allegations.
During the latter part of 2011 the 3% Rupee depreciation was criticised as ‘too little too late’ but since last February the criticism of the policies were of ‘too many, too late’ questioning the consistency of the economic policies which creates an uncertain environment for the stakeholders to consider decisions.
Responding to these latest developments the governor said that those were not ad hoc decisions but were judgmental calls which were taken at right times because the CB had a clear vision unlike many others who found fault with everything but could not be held accountable for what they said.
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