Build resilience as economy stabilises, CBSL tells private sector

By Nuzla Rizkiya

As Sri Lanka transitions from economic stabilisation to growth acceleration following its worst economic crisis in 2022, the environment is opportune for the private sector to strengthen its resilience by establishing policy buffers, an official from the Central Bank of Sri Lanka (CBSL) said.

With inflation easing significantly, CBSL Assistant Governor Dr. Chandranath Amarasekara stressed that the government should continue implementing macroeconomic policy reforms to prevent future crises, while the private sector must also take proactive steps to enhance its resilience.

“We have regained stability to a great extent, and now is the time to accelerate growth. However, CBSL’s role is limited. Growth must come from structural reforms focused on productivity, competitiveness, efficiency and governance.”

“Corporates should build buffers and strengthen resilience to face uncertainties in the global economic environment. Financial discipline and fortifying balance sheets will be essential moving forward,” Dr. Amarasekara said while speaking at a symposium organised by the Employers’ Federation of Ceylon (EFC).

Following the crisis, the CBSL has managed to lower interest rates from their peak, with treasury bill rates for 91-day securities now averaging 5 percent (down from 33 percent), while the prime lending rate has been reduced from over 30 percent to 8.4 percent.

Meanwhile, Economist and Ernst & Young (EY) Sri Lanka Director Talal Rafi echoed similar sentiments, particularly highlighting the role of the International Monetary Fund (IMF) and the Central Bank in guiding the country toward economic stabilisation.

Addressing the misconception that IMF programmes are designed to focus on growth, he clarified that the lender’s role is more similar to that of an Intensive Care Unit (ICU) in a hospital, where the focus is on stabilising economies in distress rather than driving development.

“The CBSL’s core function is price stability, ensuring that every rupee in your pocket does not lose value. The private sector must understand that economic growth is primarily driven by government policy and development banks, not the IMF or the Central Bank,” Rafi said. He explained that, in this context, domestic sector growth should be given prominent focus, similar to the expansion of external trade, along with a special emphasis on investment in digitalisation and other sectors with the potential to drive long-term economic prospects. Sri Lanka is also aiming for US$ 19 billion in export revenue for 2025. To achieve this, he stressed the need for a strategic shift from traditional avenues, supported by decisive reforms, such as increased collaboration with academia to motivate innovation-driven industries. “Sri Lanka’s GDP-to-revenue ratio will remain one of the lowest in the world even as we struggle to reach 15 percent. Progressive taxation is essential. Relying on temporary revenue measures, such as vehicle taxes, will be unsustainable,” Rafi stressed.