Saturday, September 23

Sri Lanka central bank chief on dealing with country’s economic crisis

As Sri Lanka battles one of its worst economic crises in over 70 years, its central bank governor expressed optimism the country would be able to pull through, but stressed the importance of measures that “may be not very palatable.”

We have the confidence to say that Sri Lanka would go through these times for a short period … We should be able to get out of this situation sooner than later,” Ajith Nivard Cabraal said on CNBC’s “Squawk Box Asia” on Monday.

In September, the country declared an economic emergency to control food supply and contain soaring inflation after a steep devaluation of its currency. Sri Lanka has been facing widespread and severe shortages of food and other essentials. It has also run out of cash to import fuel, leading to long queues outside petrol stations.

Cabraal acknowledged these and other challenges Sri Lanka is facing, such as rising geopolitical tensions and a tourism sector hit hard by the Covid pandemic. He said the central bank wants to “take certain key steps in order to deal with this situation, some may be not very palatable, as far as the general population is concerned. However, for the greater good of the economy, those will need to be done.”

Appeal to raise prices

To address the country’s acute fuel shortages, Cabraal said the central bank has made a “very clear appeal” to the Sri Lankan government to make a “sharp increase” in fuel and electricity prices, so there would be a “natural reduction” in demand .

People stand in a queue to buy diesel fuel at a petrol station in Colombo, Sri Lanka on March 3, 2022.

Ishara S. Kodikara | AFP | Getty Images

debt crisis

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