Jan 02, Colombo: Sri Lanka for the new year targets a 7.5 percent growth in the country's GDP and an overall budget deficit reduced to 5.8 percent of GDP while maintaining inflation at mid-single digit levels.
Reducing trade deficit from current 15.1 percent of GDP to 14.4 percent of GDP in 2013 and continuous improvement in productivity are some other goals set for 2013, the Governor of the Central Bank of Sri Lanka Ajith Nivard Cabraal announced.
Cabraal Wednesday presented the Bank's policy direction and work plan for the upcoming year "Road Map for Monetary and Financial Sector Policies for 2013 and Beyond" for the seventh consecutive year at a function held at the Central Bank premises.
The presentation comprised an assessment of the macroeconomic developments in the previous year, policy direction for 2013 and for the medium term, particularly to ensure a smooth transition into the post-US$ 4,000 per capita era.
"2012 was an extraordinary year which, once again underscored the resilience of the Sri Lankan economy," Cabraal said.
"External and domestic challenges prompted the Central Bank to adopt strong measures to stabilize the economy and the economy adjusted swiftly to these measures allowing the Bank to relax the policy stance before the end of the year," he noted.
Summing up the developments in 2012, the Governor observed that much needed stringent policy measures adopted in early 2012 to achieve macroeconomic stabilization and to curb rapidly rising domestic credit which led to higher than desired import demand combined with adverse weather also hindered economic performance in the past year.
Consequently, economic growth declined to some extent, as expected, and it is projected that overall economic growth in 2012 would be about 6.5 percent.
"Central Bank's medium term macroeconomic framework has been carefully prepared to foster the expected growth path while giving priority to ensuring inflation is maintained at mid-single digits in the next five years," Cabraal said in his presentation.
In this year, the Central Bank will allow a flexible exchange rate to reflect market conditions.
"The Central Bank intervention in supplying and absorbing foreign exchange directly, will be limited to reducing excessive fluctuations and maintaining external reserves at desired levels," it said.
The monetary institution expects to reach a US$ 100 billion economy by 2016 and will adopt several policy measures on banks and non-bank financial institutions (NBFIs) which will have to play a critical role reaching the target.
Reviewing and amending the regulatory framework to facilitate the business models of banks and NBFIs, encouraging their consolidation, and identifying and regulating the risk profiles are some of the measures the Central Bank will take regarding the banks and NBFIs.
The Governor said the Central Bank is in a position to steer the economy along a more stable and sustainable path while maintaining economic and price stability and financial system stability to support sustainable and inclusive growth this year.