CB Governor hails import controls | Sunday Observer

CB Governor hails import controls

7 October, 2018

Central Bank Governor Dr. Indrajit Coomaraswamy last week commended the Finance Ministry for introducing import restrictions on selected non-essential goods to defend a weakening currency as opposed to the strategy deployed by the previous administration in 2012 to achieve a similar objective. In a move to fix the pressure on the country’s Balance of Payments (BoP), the Central Bank in February 2012 imposed an 18 percent limit on the credit growth of commercial banks and partially floated the rupee to drag the monetary system back from a BoP crisis.

“In 2011-2012, in addition to the Central Bank failing to contain the Rupee after spending US$ 4.1 billion on intervention and the rupee depreciating by 15%, a flat credit ceiling was also imposed. This absolute ceiling on credit didn’t discriminate between luxury goods, essential goods, intermediate goods or capital goods,” noted Dr Coomaraswamy.

However, he pointed out that the raft of measures introduced by the Finance Ministry to curb imports, which came into effect from September 30, has been on very carefully selected goods excluding capital goods, intermediate goods and essential imports.

“This is only focusing on non-essential goods which is a far more nuanced and sophisticated intervention than a crude credit ceiling imposed in 2012.

“So I think that is something we need to remind ourselves because we tend to have very short memories,” the Central Bank Governor highlighted adding that the current initiative ‘is a better package than what was introduced then’.