Money and Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal said in Parliament yesterday that the influx of foreign exchange into the country reduced somewhat due to the COVID pandemic.
“Therefore, we gave the opportunity to those living abroad to open special bank accounts to attract foreign exchange and we offered them higher interest rates,” he said.
Referring to Special Gazette notification on foreign exchange, he said the interest rates offered for six months was 1 per cent and for 12 months 2 per cent. The State Minister added that this gazette is about the Central Bank making arrangements for this payment. “We had to do this on the presumption that our reserves at the time may not have been sufficient to face this issue,” he said.
He said that by the end of 2014, the country’s reserves stood at $ 8 billion. “In addition, the previous government had borrowed US $ 10 billion as sovereign bonds, in total it should have been 18 billion. They sold the Hambantota Port and got another one billion, in all it should have been 19 billion. However, what they handed over to us was $ 7.5 billion.
I recently saw the former Prime Minister making a statement that the country’s economy is in a very volatile state, warning that the country would face serious financial crisis within the next few months.
Had he still been the Prime Minister, the Rupee would have devalued drastically and the interest rates would have skyrocketed and the country would certainly have had to face such a situation,” he said.
The State Minister said that the Government had succeeded in saving the country from such a predicament. “The situation we are in today is challenging but we have been able to control the interest rate and keep the Rupee stable. So that’s why we’re devising various ways of bringing in around $ 32 million into this country,” he said.
He said that the basic idea of the Government is to successfully bring foreign exchange into the country and not to borrow on interest.
“In 1997, Malaysia dealt with the economic crisis in the same way. Instead of borrowing, they went beyond that and implemented a plan to increase the flow of foreign exchange into the country,” he said.
“Today Sri Lanka has also introduced such a turning point to our economy to attract foreign exchange. In addition, we have also taken measures to increase our FDI,” he said.
He said that the silver lining of the COVID pandemic has been the introduction of this new mechanism to direct the country’s economic path in a new direction.
State Minister Cabraal said that many were of the view that the Government will not be able to record growth. “But we managed a 3.5 per cent growth rate in the first quarter and we forecast a huge 20 per cent growth rate during the second quarter of 2021,” he said.
He said that the country is now on the right track and expressed hope that the Government will be able to derive the expected outcome from the Gazette.