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Fiscal management: Remittances will flow if rupee is floated: W.A. Wijewardana

06 Mar 2022

 
  • Import restrictions will not have desired effect: Wijewardana
   By Skandha Gunasekara Sri Lanka is unlikely to see an uptick in foreign remittances until the rupee is floated, former Central Bank Governor W.A. Wijewardana told The Sunday Morning.  Wijewardana said the Central Bank of Sri Lanka (CBSL) appeared to be taking the correct path with regard to interest rates, but that the rupee needed to be allowed to float, pointing out that foreign remittances for January were far less than they were the same month in 2021.  “It seems the Central Bank is finally on the right track by taking measures such as increasing interest rates and tightening the monetary policy. However, I don’t see the current incentives for foreign remittances working out. There has been a loss in foreign remittances in January this year, where it has come down to $ 457 million when compared to $ 650 million in January last year. We will see significant foreign remittance inflows only when the rupee is allowed to float to its actual value.”  In addition, he noted that import restrictions would not have much of an impact at this point.  “The Gazette has not been issued yet so we don’t know what products will be banned from being imported but even then, it won’t make a huge difference at this point. Even Minister of Finance Basil Rajapaksa had noted in Parliament that import restrictions won’t have an effect.”  CBSL Governor Ajith Nivard Cabraal, addressing a press briefing on Friday (4), said that certain changes would be made to the monetary policy, including increasing interest rates and imposing import restrictions.  “It has been decided to revise upwards the caps imposed on interest rates applicable to credit cards to 20% per annum, on pre-arranged temporary overdrafts to 18% per annum, and on pawning facilities to 12% per annum. Directions to affect these regulated interest rates will be issued shortly.”  The Governor’s policy changes to help the economy included import restrictions, increased fuel and electricity rates, incentivising foreign remittances, implementing energy conservation measures while accelerating moves for renewable energy, increasing Government revenue through taxes, mobilising foreign financing and non-debt foreign inflows, monetising non-strategic and underutilised assets, and postponing non-essential and non-urgent capital projects.  


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