Action with regard the alleged Treasury Bond scam will be taken after investigations into the issue are complete, Central Bank Governor Dr. Indrajit Coomaraswamy told the media at the launch of the Road Map: Monetary and Financial Sector Policies for 2017 and Beyond at the Central Bank auditorium last week.
The Central Bank launched two internal investigations last year on the alleged Treasury bond scam of Perpetual Treasuries Limited linked to Arjun Aloysius, the son-in-law of former Central Bank Governor Arjuna Mahendran.
“We have launched two investigations in this regard and when they are completed we will consider next course of action. Until the investigations are over we cannot say anything regarding the alleged scam,” the Governor said. When asked about the timelines for the completion of the investigations he said he cannot specify an exact time-frame since going into details of dealings of this nature is a cumbersome process.
“It’s not as easy to scrutinize transactions of this nature and pin the blame on someone within a short time. We need time to study as it is a highly complicated issue,” the Governor said. The Central Bank has recognized the need to have a clear policy framework for primary dealers who play a vital role in trading of government securities.
“There is high potential to deepen the debt securities market in the country. Hence, a clearly stated policy framework is needed to increase the safety of the government securities market investments,” Dr. Coomaraswamy said.
The Central Bank has revisited the regulatory framework of the securities market and based on it, the bank will come up with an appropriate regulatory framework for primary dealers in keeping with the developments in the market.
The Bank hopes to set up and implement a restructuring mechanism for distressed primary dealers.
“We have taken steps to strengthen the Macroprudential Surveillance Department of the Central Bank to keep a close watch on the developments in the financial system,” the Governor said.
The Central Bank has taken measures to strengthen the payment and settlement infrastructure of the country and to develop an efficient and stable payment and settlement system in the country that could cater to the growing payment needs.
With regard to the statement made by the Finance Minister that Rs. 13 billion had gone out from the Central Bank during the 2015 election campaign of the former government the Governor said the Central Bank has launched investigations on the matter. The attainment of economic and price stability and maintenance of financial system stability are the core objectives of the Central Bank.
The Central Bank implemented a number for proactive policy measures in 2016 to ensure economic and price stability which helped curb demand pressure and maintain inflation at a low level.
The Exchange Control Department initiated several measures to create a more conducive environment for local and foreign investors.
The new Foreign Exchange Act is designed to bring further improvements in this regard. Measures will be taken to further relax foreign exchange transactions in the medium term. The economy recorded a moderate growth rate of four percent during the first nine months of last year due to the agricultural sector performance being subdued driven by less value addition of rice, tea and rubber, the adverse weather and low demand in major export destinations.
However, industrial activities grew at a substantial pace during the year with the contribution from the construction sector. The manufacturing and mining sector made a noteworthy contribution to the growth.
The external trade performance remained modest during 2016 although certain improvements were seen towards the latter part of the year. Export earning declined by around 2.6 percent in the first 10 months while import expenditure rose 0.2 percent which boost the trade deficit by 3.7 percent to USD 7.2 billion. Earnings from tourism recorded USD 3 billion during the first 11 months, an increase of 14.7 percent over the previous year. Worker remittances recorded moderate growth of 3.1 percent during the same period which amounted to USD 6.6 billion. The gross official reserves is estimated to be around USD 6.0 billion by the end of 2016.
Inflation remained at low levels although there were upward pressures during the year. Inflation remained close to the mid single digit level during the year.
The Governor said the economy will record between 5-6 percent growth this year. However, there would be many downsides effects such, droughts that would affect food prices and power generation and the as the volatility in the global economy. When asked how would the growth come and through what areas the Governor said, growth will pick up through foreign direct investments and exports. However, he said nothing could be predicted with regard to the global economy. It is even difficult to predict what would happen in a fortnight. We will attach a high degree of vigilance of the global situation.
“We are in a challenging world. Sri Lanka is graduating to an upper middle income economy. However, the objectives of the government and aspirations of the people cannot be met with ‘business as usual’ attitude on the part of the public and private sectors. Government policy making needs to be proactive, be more data driven and less influenced by short term political expedience,” the governor said.