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Former CB Governor highlights 4 critical steps government must implement

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Former Governor of the Central Bank of Sri Lanka (CBSL) Indrajit Coomaraswamy has identified four critical steps that the government must immediately start to implement as the first stage of restoring the economy to better health.

In an interview with The Wire, Coomaraswamy said that if President Ranil Wickremesinghe does not implement very tough measures, the country’s economy can fall into the abyss.

He further said that he believes it will take the Sri Lankan economy at least five years to get back to where it was, provided certain tough steps are implemented by the Wickremesinghe government.

He outlined the following four critical steps that the government must immediately start to implement.

First, it needs an IMF arrangement because the country doesn’t have foreign exchange or rupees. An arrangement with the IMF will act as a certificate of good housekeeping and also facilitate funding by other institutions and, possibly, by friendly supportive countries.

Second, President Wickremesinghe must find a way of getting essential supplies such as food, fuel, and medicines, and for this, he needs to arrange bridging finance. Although India has already given, in swaps, loans etc., up to $3.8 billion, Coomaraswamy is hopeful India will give more. He is also hopeful that Japan will step in and help but, in this case, it could require Sri Lanka to restore some of the projects linked to Japan that were terminated by the Rajapaksa government. However, Coomaraswamy does not think there will be much help from the United States because its attention is diverted in other directions.

Third, Coomaraswamy says major structural reforms are necessary. They include reform of the functioning of including the disinvestment of state-owned enterprises as well as ensuring that the price of utilities are cost reflective. In other words, subsidies must be constrained. Coomaraswamy also believes that Sri Lanka must give independence to its Central Bank and strengthen the Fiscal Management Responsibility Act.

Fourth, Coomaraswamy says steps need to be taken to improve the business climate of the country. He believes work to identify the necessary measures has been done earlier but it now needs to be pulled together and implemented. (NewsWire with inputs from The Wire)

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