- Godahewa says SL economy contracts while regional economies grow ‘rapidly’
- Notes CBSL did not tame inflation, people are not buying goods
Sri Lanka’s inflation came down in the past few months due to the lower demand for goods and services and not due to the measures taken by the Government of Sri Lanka to tame the inflation, independent MP Nalaka Godahewa said.
Speaking to reporters yesterday (2), he said that by maintaining high-interest rates, the Central Bank of Sri Lanka (CBSL) Governor and the Government are saying that they wanted to contract the economy in order to tame inflation.
He noted that when other economies in the region such as India and Vietnam are growing rapidly, Sri Lanka’s economy is contracting and that the Government has no plan to curb this economic contraction.
“Inflation is not tamed (by the Government), people have no money to buy goods and services, therefore the demand has come down; that’s why there is some control over inflation,” Godahewa said.
Sri Lanka’s economy is expected to contract by 3% in 2023 according to Central Bank forecasts, while the Asian Development Bank (ADB) is expecting a contraction of 3.3% and the World Bank (WB) a contraction of 4.2%.
However, in the Monetary Policy Review held in January, Central Bank Governor Dr. Nandalal Weerasinghe said that the Central Bank, by tightening monetary policy, minimised damage to the economy and added that if high interest was not maintained, Sri Lanka could have had a double-digit contraction and a 100% inflation rate or hyperinflation.
National Consumer Price Index (NCPI)-based headline inflation came down from 73.7% in September 2022 to 53.2% by January 2023.
Further, Godahewa said that the recent appreciation of the rupee (LKR) against the US dollar (USD) was mainly due to the foreign exchange that came into the country through means such as export revenue, but added that it doesn’t signify that the overall economy is growing.
“When we look at the exports in January, it is clearly less than the exports last year,” he said.
January 2023 saw an export revenue of $ 1 billion compared to $ 1.1 billion a year ago.