00:00I do want to start with the oil price issue.
00:02Can you talk to us about how vulnerable Sri Lanka is to these energy shocks?
00:07Of course Sri Lanka is exposed to this,
00:09especially because we are a net energy-imported country.
00:13We only have renewable energy like hydro, wind and solar.
00:17So that's dependent on thermal power is high and for transport.
00:22So as a result, we are seeing inflation was running around 2%
00:27until March, April and all of a sudden with the government policy
00:33of cost-recovery pricing, domestic pricing,
00:36inflation shot up from 2% to 5% and now close to 7%
00:42which is the upper band of our central bank target limit.
00:46So it clearly says energy is an important component.
00:49Energy and transport has a very high weight in the consumer basket.
00:53As a result, oil is vulnerable and basically exposed
00:57to high energy and transport prices.
01:00You have earlier declared that the accommodative policy is over.
01:04What kind of oil price do you need to see to give you some confidence
01:08that inflation is coming under control?
01:09What we have predicted is that our baseline scenario is that
01:13if oil prices remaining around $80 a barrel for this end of the process
01:19this year and next year, then we can manage the situation.
01:22So if there are any surprises, then obviously we have a challenge.
01:27So what we see, current prediction of around 80% now
01:31is moving around that level.
01:32If it remains that level, I think we can manage inflation.
01:35We are expecting inflation to come down around our target level of 5%
01:39in say 2% of this year and early next year.
01:42Do you think that's an optimistic view?
01:45Because we had June 6.8%, July 7.3%, 5%-ish is the target.
01:52Do you think policy is restrictive enough at this point?
01:55Yeah, because when you look at our tightening in May,
01:58it's very proactive and sharp and it was a mark surprised by the market
02:02by 100 basis points.
02:03We did that because we saw inflation was coming up, moving around 7%
02:09for a couple of months this year, especially towards the end of this month,
02:13end of this year.
02:14So that was a proactive measure for us to contain,
02:17one is the aggravation expectation,
02:19second will slow down the credit growth,
02:21this was expanding rapidly,
02:23and also to have any undue pass-through
02:27through persistent inflation from current high levels
02:31as it is of oil prices.
02:32So for that, all these things are tightening in our view
02:36was very proactive and good enough measure.
02:39That's why last time we did not revise the interest rate in the last cycle.
02:45But we are very closely monitoring the situation.
02:48We have predictions say it has gone down 5%
02:51so that I think we have sufficient tightening.
02:54We also see as a result credit growth is now slowing down
02:58and also currency is now fairly stable
03:02and gradually appreciating from the pressure we had in April and May
03:07as a result of very high oil imports.
03:10And as a result, now we are seeing a stabilizing situation
03:13as a result of partly the monopolist measures that we had in May
03:18and also some of the measures brought in by the government
03:21to curtail certain imports.
03:23For example, motor vehicle imports, they have a surcharge imports.
03:26And they have loan-to-elope ratios of imports by the central bank
03:29as a macro-pudential measure.
03:31Now those policies are now working, as we can see now, and going forward.
03:35What about the growth outlook? Any risks there?
03:37If you look at the, Sri Lanka has been growing around 5%
03:40from the third consecutive year after the crisis.
03:44So it is steady, stable growth around 5%
03:47and even Q2 we see can be growing around 5%.
03:51There could be some slowdown in the second half
03:53but still it could be around between 4% to 5%
03:56because the slowdown is expected because of the tight motor conditions
04:01as well as the high prices.
04:03This will have some impact on the growth
04:04but it won't be very adverse
04:07because now things are settling down.
04:10We think this year's second half may be around 4% to 5%.
04:12It will come back to more potential growth
04:15to about 5% next year onwards.
04:17Well, you're here in Australia for the Invest Sri Lanka event,
04:20events here in Sydney and Melbourne also.
04:23What's your message to investors here?
04:25Why should they be putting money into Sri Lanka?
04:27I think when you look at the situation now,
04:29clearly after the crisis, economy is recovering nicely.
04:33Around 5% is a very good growth.
04:34In going forward also, uncertainty and vulnerability that we saw,
04:39we have been able to manage the middle-earth situation
04:41and also we had the internal DITRA,
04:44the cyclone had an impact, a small impact.
04:47With all these kind of external shocks,
04:49we have been able to manage the situation well.
04:51So going forward, now it is a good time.
04:54The economy is recovering and now moving to high-growth path.
04:56So for anyone to benefit for the future steady growth
05:01that we have seen over the last three years
05:02and the next couple of years,
05:04this is the time for anyone to come to Sri Lanka.
05:06And with currency stable and there's reasonable food and macro policy,
05:11even fiscal policy, much more prudence now.
05:14As a result, the private sector growth,
05:17backed by private investors now.
05:19We can see realisation there's time for Sri Lanka inventory in Sri Lanka now.
05:24How is Sri Lanka navigating the IMF programme
05:27given just the degree and magnitude of global uncertainty at the moment?
05:31If you look at the programme,
05:33we have been successfully completed the fourth and fifth few together in the first quarter.
05:40Now the next preview is somewhere in November, December.
05:44And we're expecting that course to be completed.
05:46And then next year,
05:47we will be completing four-year Accent Fund Facility,
05:51fully completed programme by the second half of next year.
05:55So it's going well.
05:56And I'm first recognised it.
05:57It's one of the case studies that Sri Lanka is one of the countries
06:00the IMF backing and support has come out extremely well
06:05to its stability and also medium-level long-term growth.
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