Artificially creating ‘sugar highs’ in market not helpful – CB Governor
July 28, 2016 01:35 pm
Sri Lanka’s central bank governor Dr. Indrajit Coomaraswamy says that while stock market sentiment is presently subdued, he does not believe there are any quick fixes to the problem and that trying to create “sugar highs” by artificially boosting asset markets or growth will not help.
He was addressing a gathering this morning, during his first visit to the Colombo Stock Exchange (CSE) since assuming duties as the central bank chief.
“I am very aware that I am here with you at a time when market sentiment is subdued, even very subdued.” If you look at turnover, capitalization, pricing, etc. clearly this is not the best of times, he said.
“We don’t think there are quick fixes. I think trying to create sugar highs by artificially trying to boost asset markets or growth or anything else is not helpful. In the end it creates distortions where everybody really loses.”
He said that the critical thing is to create the fundamentals to ensure that the economy grows, that companies are able to do their business and make profits, that there is employment generated that creates a demand in this system and that there is a virtuous cycle which is built on strong and sound fundamentals.
Working with the government that is what in the Central Bank we would like to do, he added.
The governor said that the “sun is not shining yet” but one could argue that it’s “beginning to shine” as the government has embarked on a stabilization process.
“Without stabilization of the economy nothing is possible. And at the heart of that stabilization needs to be fiscal consolidation. This is a problem we have had for 3-4 decades and it seems the government is making an effort to get to grips with that. So that in terms of the future is one positive sign.”
The Prime Minister is due to make his five-year plan statement within a couple of weeks and that will layout a framework and a direction in some detail, he said, adding that he hopes this will be the second positive sign.
Dr. Coomaraswamy said he believes that the stabilization effort and the laying out of a framework should create more confidence and greater positive sentiment in the market as well.