Home » CB Governor blames closed economy as one of the reasons for crisis

CB Governor blames closed economy as one of the reasons for crisis

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In another drivel statement, Central Bank Governor Nandalal Weerasinghe claims that Sri Lanka is both externally and internally fragmented and the worst affected by the ‘post-Covid world.’

He was speaking at a Panel Discussion on ‘Strengthening Institutions for Sustainable Growth in the Post-COVID World’, held in New Delhi on Friday 06.

Externally, he said, giving an example of Iran being sanctioned by the US when Sri Lanka’s refinery uses Iran crude oil, but due to the sanction Sri Lanka had to stop buying oil from Iran.

Local media had given wide publicity to these observations made by the Central Bank Governor at the panel discussion.

Expressing dismay on these remarks made by Central Bank Governor Nandalal responsible for the people and who is bound to divulge the absolute truth, several energy experts said that there was no such requirement of using Iran crude only although the refinery was a gift from Iran.

It can use light crude oil with less sulfur and the Ceylon Petroleum Corporation took measures to replace Iranian crude imports with alternative grades, including Oman crude, Saudi Arab Light or Malaysia’s Miri Light.

Sri Lanka now buys crude and refined products from countries such as Oman, Saudi Arabia, Singapore and Vietnam at a much higher price.

Even during the period of US sanctions imposed on Iran, the CPC was sourcing all its crude requirements from the spot market after its regular supply from Iran was cut, corporation sources said.

They said fuel purchases from Iraq, Saudi Arabia and Oman were options available for Sri Lanka and it had started purchasing Saudi Arabian Light Oil instead of Iranian Light Oil in the recent past.

Sri Lanka is the latest Asian nation to accept Russian crude after Moscow’s invasion of Ukraine prompted widespread condemnation and sanctions.

The Sapugaskanda refinery is using Siberian Light crude, a CPC official said, adding that it’s one of several grades of crude that our refinery can process, alongside Abu Dhabi’s Murban and Iranian Light oil.

Therefore the CB Governor should not make such comments without verifying facts as the whole world knows what is happening in Sri Lanka and its economic crisis triggered due to tools and policies adopted since 2020.

Speaking on the internal policies, he recalled Sri Lanka’s trade integration, where it was one of the first countries in Asia that opened the economy in 1977.

“We integrated with the region and the world at the beginning for several decades and then moved backwards due to internal policies and nationalistic protectionism. From an open economy we became a more protectionist closed economy which is one of the reasons why we are facing the crisis.”

But he has failed to mention about the introduction of policy tools by the Central Bank in 2020 by turning the whole monetary policy upside down following the verbal attack leveled at CB top officials including former Governor W D Lakshman and Senior Deputy Governor Nandalal Weerasinghe by then President Gotabaya Rajapaksa on June 16 2020.

He told these officials “You have several tools that can be used. Those tools have to be utilized. However, our Central Bank does not use a single tool. It just stays idle.”

“Give me your suggestions on how to strengthen the economy, how to assist banks under these dire circumstances, and how to categorically assist small scale and medium scale businesses as soon as possible, ” he demanded.

As a response the Central Bank deployed an array of monetary policy tools in 2020, while being one of the first central banks in the world to ease monetary policy citing the outbreak of COVID-19.

These policies, including unconventional measures, were executed at an extraordinary pace, size, and scope, aimed at injecting sufficient liquidity into the market and lowering borrowing costs, thus supporting financial markets and the recovery.

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