Sri Lanka’s monetary authority will let go the government debt management role soon, Central Bank Governor Dr. Indrajit Coomaraswamy said yesterday.
“The Central Bank plays the role of debt management agency for the government of Sri Lanka. It will probably change soon,” he told a forum in Colombo held last evening.
The government had announced the decision to set up a separate debt management agency earlier this year, with assistance from the World Bank and the Japan International Cooperation Agency (JICA), though a timeline on setting up the new agency is yet to emerge.
Dr. Coomaraswamy said that, so far, the Central Bank has had difficulty in performing the role, as it is hard to ascertain the borrowing requirements of the country.
“There has been relatively short visibility in terms of what the governments’ borrowing requirements are,” Dr. Coomaraswamy said.
Finance Minister Ravi Karunanayake, who also spoke at the event, noted that the previous government had borrowed more than what was presented in accounts, through State-owned enterprises.
“When we took over, though our debt was Rs. 8.8 trillion, finally it was Rs.9.9 trillion and then there was Rs.1.3 trillion borrowed off the balance sheet,”
Dr. Coomaraswamy noted that if there was better public financial reporting, and if all government debt management was taken over by one unit, there would be greater visibility in managing borrowings.
He noted that since the government is focusing on fiscal consolidation, the Central Bank could set lower and stable exchange rates, and manage a stable exchange rate, possibly hinting that the Central Bank would focus full time on inflation targeting.
The International Monetary Fund, when granting the US$ 1.5 billion loan to Sri Lanka this year, said that it would prefer if the monetary policy in the country would focus on inflation targeting instead of other policy tools, and conditions on continuity of the loan is linked heavily to the country’s inflation. (CW)