The Central Bank of Sri Lanka (CBSL) wishes to make the following statement in relation to the article titled “Government and CB have abdicated vital statutory duty by not being able to deal with rupee depreciation” that appeared in various newspapers on 08th and 09th October 2018.
The Central Bank is statutorily charged with the responsibility of securing, so far as possible by action authorised by the Monetary Law Act (MLA), a) economic and price stability; and b) financial system stability, with a view to encouraging and promoting the development of the productive resources of Sri Lanka. While financial system stability is identified by the resilience of the financial system to internal and external shocks, price stability is generally defined as maintaining low and stable inflation, which leads to economic conditions that support high and sustainable levels of economic growth.
Historical data on inflation (Figure 1) shows that, unlike in certain periods in the past, inflation has been maintained at single digit levels for a continued period of almost 10 years, suggesting that the Central Bank has been more successful in carrying out its statutory responsibility of maintaining price stability in the recent past. While it is expected that this will reduce uncertainties in the economy and support high economic growth in future, the ongoing efforts to introduce flexible inflation targeting as Sri Lanka’s monetary policy framework will enable the Central Bank to maintain inflation at mid-single digit levels on a sustainable basis.