'Single-digit inflation by early next year'

Central Bank Governor tells American Chamber luncheon

Shirajiv Sirimane

INFLATION: Sri Lankan Government would bring down the inflation rate to a single digit by the early part of next year, Governor Central Bank Ajith N. Cabraal said.

Speaking at the American Chamber luncheon in Colombo yesterday Cabraal said the rate would be lowered to 10 percent by the end of the year.

"The inflation was very high and the initial spike has now come down.

We are very concerned about containing inflation and several meaningful steps are now being taken to curtail it," he said. He said that the unemployment rate in Sri Lanka is at its lowest this year and regional disparity in Sri Lanka too is being addressed.

One of the key areas the Government is concerned is the high cost for fuel imports.

A sum of US $ 636 million was used to purchase 30 million barrels of oil and this year the Government would import the same amount of oil but at an increased rate of US $ 2.2 billion.

The Central Bank Governor said that Sri Lanka is not fully utilising the benefits of the Free Trade Agreement with India and steps should be taken to intensify trade out of Sri Lanka which was US $400 million last year.

"An Indian investor pointed out that there are 4,000 items that can be imported to India duty free to attract the huge 2.1 billion population is Indian. This is an area the investors should take note of," he said.

Similarly foreign remittances too has increased by 24 percent. "However the country is not receiving all the money and we are now negotiating with the banks to increase the foreign remittance flow to Sri Lanka. When this happens we expect remittances to increase by around US $ 300 to 400 million annually," he said.

The Central Bank boss also said that Sri Lanka has foreign reserves to purchase imports for more than three months.

Airing his views on the leisure sector he said that more high spending tourists are now visiting Sri Lanka and this would add value to the destination.

"We expect arrivals by the end of the year to be on par with the figure in 2004, (before the Tsunami). But we target the revenue to at least US $ 100 million to be more than 2004," he said.

He explained to the gathering the advantages Sri Lanka has and the incentives that the country offers for the investors and said that this is the right time to invest in Sri Lanka.