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    Live Twitter Q&A Session with the Governor of Central Bank of Sri Lanka on 24th Sept.2014

    October 07, 2014

    The first part with 59 Questions and Answers sets out the live Twitter exchange between 10.00 a.m. and 11.00 a.m. with the Governor on 24th September 2014. 

     

    The second part contains the answers of the Governor for questions that could not be answered during the above one hour session. Questions that were repeated have not been included.

     

    The Governor and the Central Bank Thanks  all those who participated in the Twitter Session.

     

    Part I

     

    1. Still no PayPal for Sri Lanka?

    There is some progress on this matter and we are hopeful that it should happen by early next year.

     

    2. Do you think that our budget allocation for R&D is enough?

    Allocations are always difficult because there are many competing interests. There are also many tax incentives provided.

     

    3. What is your outlook for the interest rates and inflation?

    It is a benign outlook.

     

    4. Sir, do you believe that our Sri Lankan banks are over regulated ?

    When times are good, people think there is over regulation. Opposite when times are tough. Our regulation is appropriate.

     

    5. Governor, you were dismissive about BitCoins the last time you were asked about the topic. Have your views changed?

    No.

     

    6. What do you see as the most pressing institutional reforms SL should undertake to sustain high growth rates in the long term?

    We need to keep our infrastructure drive as well as macro fundamentals at benign levels.

     

    7. IMF came out with a report last week that said SL's public debt is too high. How concerned are you with this?

    Our public debt is reducing as a percentage of GDP. That means we are on the right track.

     

    8. "Every Sri Lankan owes debt (Public Debt) more than their per capita income" how do you see that?

    That was true in 2002 and 2003. Our debt to GDP levels have been brought down from 105% in 2002 to 75% by 2014.

     

    9. Recently at a meeting you said by 2020 SL will have a per capita income of $7500 - what would rural Sri Lankans get by 2020?

    The incomes of rural Sri Lankans would also increase significantly from what it is today. Policy measures are in place.

     

    10. Improving infrastructure and capacity building itself will not generate technology innovations. What else are you doing?

    Without capacity building technology innovations won't take place. Hence, it is vital that we continue this process.

     

    11. By 2030 Sri Lanka will have 30% people above 60 years of age. What are we doing to get ready?

    There is a gradual process to react to this condition. That is presently in place with pensions and other schemes.

     

    12. Colombo city is inundated with traffic. What is the loss of productivity due to traffic? Are there any plans to alleviate?

    Growing cities encounter this challenge. Better roads, good traffic manners and mass transportation will help.

     

    13. Why Sri Lanka can't allow some vehicle manufacturer for the local manufacture, we can reduce our vehicle imports from that

    That is allowed and it is being done.

     

    14. Banks charge 24% p.a. for overdue LC's. This hurts entrepreneurs with very short term liquidity mismatches. Lot of excess CR in MKT

    That charge seems excessive and we will look into this matter.

     

    15. Appreciate that penal interest was capped with 2%. But banks use loop holes to exploit this.

    Please let us know what loophole is being used. We will deal with it. 

     

    16. Whilst CB held programs to encourage Islamic banking BBS demands it be taken off lka banking system. Views?

    Banking business is conducted according to the Sri Lankan Banking Act. Hence, there should be no concerns.

     

    17. Do you think auto loans with a residual value a good product for SL? If so can it be done for houses too with a balloon payment?

    We will consider your suggestion. It is an interesting one.

     

    18. Lankan accumulated debt represents 589% of the government revenue -IMF and Moody's report, what is your view?

    What is important is debt sustainability and the Sri Lankan debt is sustainable.

     

    19. Any expected impact towards consumption in medium term due to working age population expected to decrease?

    This impact would be well compensated by the higher incomes.

     

    20. Any plans on limiting population growth in highly populated areas?

    No. There would be the natural inter country migration that would address this phenomenon.

     

    21. Having an aging population what are CBSL plans towards healthcare?

    Healthcare is improving and that is one of the reasons that people are living longer.

     

    22. What's your view on the yield curve of SL and more specifically inside 1 year?

    It is expected to gradually shift downwards. 

     

     

    23. Dear Mr. Ajith, I'm a customer of CIFL. Please let me know the status of Restructuring? Also depositors re payment?

    Finally, the court cases are over and the CBSL can get down to serious restructuring.

     

    24. University Students get only Rs. 2500 as Mahapola Scholarship since 2006. Can they expect any increase from 2015 Budget?

    Students in State Unis receive free education in addition to scholarships that are periodically reviewed.

     

    25. What is the progress of merging Banks & finance companies? Which Banks going to be merged?

    Our regular updates show that this process is progressing well.

     

    26. Governor, you have been trying to increase the private sector borrowing during the last two years, but with little success? Why?

    Private sector has enjoyed healthy profits and also accessed direct funding. Hence, less borrowing.

     

    27. Tell us why these LKA fixed deposit interest rates declined to very low levels?

    That is due to low inflation which has preserved the value of the deposits on a long term basis.

     

    28. Governor, why do you think the Private sector doesn’t borrow, as expected by the CBSL. Why?

    Private sector now has many sources from which they could access capital other than only from banks.

     

    29. Sri Lanka Banks charge a fee of Rs. 15-75 for ATM withdrawals of Non User's Banks ATMs. Can we reduce this?

    In the common ATM switch the charge is limited to Rs 30/- .

     

    30. Did CBSL provide those reports requested by PayPal & report on Sri Lanka’s exports? Where are we standing on this?

    This matter is handled through a private commercial bank. CBSL is also supporting the effort as needed.

     

    31. What is the future of Islamic Banking Sector in Sri Lanka.?

    Different banking services could be provided in Sri Lanka as long as those comply with the Banking Act.

     

     

    32. Can we expect decrease of taxation for importing vehicles in next year?

    You will have to await the budget and that’s a matter for the Minister of Finance.

     

    33. Is there a further decrease of Lending Rates? Why people use borrowing for Consumption rather than investment?

    We expect long term lending rates for projects to decrease. 

     

    34. Governor, what impact the recent drought in certain areas will have on the economy and inflation in the coming months?

    We normally factor some impact of droughts and other natural conditions in our projections.

     

    35. Are we surviving from ‘Debt trap’ or moving towards it. Are we safe now? Your Comments?

    We are safe and our debt sustainability is improving each year.

     

    36. What is the Progress of Colombo Stock Exchange? Are there foreign inflows?

    We are satisfied with the progress as well as the foreign interest in our capital market.

     

    37. During your term you had a remarkable journey. In your opinion what was the biggest mistake you made ?

    I am advised by very competent people. Hopefully, I could go forward without making big mistakes!

     

    38. Under present low interest rate regime do you see a risk of assets bubble like US?

    We keep a close watch and we are satisfied that so far that there are no signs of bubbles.

     

    39. Is CBSL planning to launch bonds with other foreign currencies like Euro and GBP?

    Each time we issue bonds we consider all options that are available.

     

    40. What would be the USD/LKR in end of this year?

    We expect the Sri Lankan Rupee to be stable in the coming months.

     

     

    41. මහබැබැංකුව අපිට ආදරෙයි නේද ?

    අපේ වගකීම ඉෂ්ට කිරීමෙන් අප පෙන්වාදී ඇත්තේ අපේ රටවැසියන් ගැන අප කැක්කුමකින් කටයුතු කරන බවයි.

     

    42. Is CBSL planning to improve and the data resources of Stock Price List and Colombo Consumers price list?

    Over the past several years, we have helped to improve all data sources and would continue to do that.

     

    43. When are you listing the restructured Standard Finance Company in the Diri Savi Board, which was an innovative strategy by you?

    This matter is now with the Colombo Stock Exchange and we believe they are working on it.

     

    44. Where can I get a crisp 10 rupee note now? For my collection ☺

    The Rs 10 notes are being replaced with coins. If you wish to have a new crisp note, you can get it from the CBSL.

     

    45. What do you think about IT Sector? Is it supporting to the National income?

    IT is one of the fastest growing sectors and is supporting the GDP, foreign income and employment generation.

     

    46. Insurers argue lower interest rates would hamper sector growth as they receive low interest income from govt.sec. Your views ?

    All stakeholders agree that low inflation and interest rates help investment and growth.

     

    47. CB instructed banks to keep aside a % loans for Agriculture development. How is the progress of it?

    Progress is satisfactory.

     

    48. Cost of Living is high but Sri Lanka’s Inflation Rate is low. Why is this? Any changes in the commodity Basket?

    Inflation measures rate at which prices increase & that is at a low rate, which results in price stability.

     

    49. Any initiative taken to build up national payment gateway?

    There are many initiatives that ensure the efficient payments system needed in an economy of our size & nature.

     

    50. Sir, what're the steps that taken to develop the forex market in Sri Lanka?

    We have been working closely with the Forex operators to ensure that the market is efficient and effective.

     

    51. Banks are not only to make low risk lending and make profits. Have to take some risk and lend to develop country. Your view sir?

    Banks have to balance their risk profile to make profits, stay stable and also develop the economy.

     

    52. Can we expect an increase of allocations for education sector from upcoming budget? (percentage increase from GDP)

    Sri Lanka's education system is providing reasonably satisfactory results and that should be continued.

     

    53. Sir, any suggestion/ directives from CBSL to banking sector on improving private credit growth?

    Our policy action of yesterday addresses this issue.

     

    54. Yes sir, saw the decision as encouraging, will facilitate in banks to go out from the conservative model?

    Banks are beginning to be more innovative in the new evolving circumstances.

     

    55. What happened to James Packer's Project? Is it still going on?

    Certain projects take longer to start than others. Hence, it is a matter for investors as to when they commence.

     

    56. Is EPF fund managed properly? Is it running in a loss?

    It is very well managed and producing results which are highly satisfactory.

     

    57. Mr. Cabraal Any news on the golden key repayment? So many depositors still awaiting repayment for so long...

    The implementation of the payment plan proposed by the CBSL has to be implemented with court blessings.

     

    58. We hear colossal amounts of money are being spent on PR exercises in US. CB has given explanation but do we really need this?

    When various detractors attempt to discredit the image of the country and discourage investors we have to respond.

     

    59. Governor, why do you want so much of officials to conduct a twitter session?

    We respect you and we want you to know that we at the CBSL take your questions seriously. That's why!

     

     

    Part 2

     

    60. SL Govt. to spend Rs. 1,812 billion in 2015, how much for science and technology development?

    Rs. 4.2 bn. directly to Min/Tech and Sc., in addition to research expenditure in several other Ministries.

     

    61. Is it legal to do online forex trading in Sri Lanka? I meant by an individual via overseas broker over the counter market?

    The current forex regulations require an underlying transaction.

     

    62. What’s the policy keeping the interest late low?

    When inflation is low for a long period, interest rates also decrease.

     

    63. Are you satisfied with Stock Market progress as well as foreign interest in Sri Lanka’s capital market?

    Foreign investment by way of portfolio, loans and FDI is increasing significantly.

     

    64. Are you worried that gap between 5 year LKR bond and same tenor USD bond contracting too fast with yesterday's rationing of SDF.?

    We take an overall view of the economy when we make policy decisions.

     

    65. For how many more millenniums are we in debt?

    Our debt to GDP levels have been brought down from 105% in 2002 to 75% by 2014. Will reach 50% by 2020.

     

    66. Any views on BitCoins? Why isn’t it used here for transactions?

    It is always more prudent to use currencies that are backed by a Central Bank or a Monetary Authority.

     

    67. Is there a possibility to reload ones foreign travel card if the holder is abroad? Is it still restricted?

    Foreign travel expense is a current account transaction and there is no restriction.

     

    68. Are you concerned about slow private sector credit growth, domestic consumption growth, tax revenue, exports & FDI? Impact to Road Map targets?

    Overall, our Road Map is on target, although certain components may be behaving differently.

     

    69. රුපියලත්තටමස්ථාවරද?

    ඹව්.  ඇත්තටම ස්ථාවරය.

     

    70. Is there any particular reason why there is a shortage in Rs. 10's?

    Rs 10 coins are freely available, although notes are gradually reducing.

     

    71. How can we maintain such a high economic growth rate while maintaining macroeconomic stability?

    By implementing a sound policy framework which attempts to keep a balance between the competing factors.

     

    72. What’s the best area to invest my money? Savings, FDS, stocks, a land, etc.?

    You now have many options to diversify your investment portfolio.

     

    73. Thank you, but at this very moment in time, what is the best option for ahigher return that you recommend?

    That is up to you, depending on your risk profile and return requirements.

     

    74. Why can’t CBSL carry out a moderate policy?

    Our policies are moderate and implemented in the national interest.

     

    75. How are the performances of your recently introduced gold loan credit guarantee scheme? Up to the expectations?

    It’s a little slow as yet, but we expect it to pick up.

     

    76. In 2012 CBSL curtailing credit growth. Now excess in easing?

    Managing an economy is complex, and conditions change from time to time.

     

    77. What future do you see in private equity and venture capital in Sri Lanka? Any possibility of CBSL endorsement?

    It’s very important, and we endorse it. But Sri Lankan mind sets must also change.

     

    78. We fear negative publicity to a sovereign product of the country would affect the market & industry.

    Negative publicity can be damaging and hence must be countered.

     

    79. Recent introduction "gold loans under credit guarantee scheme by CBSL". Is this a successful pawning scheme?

    Yes, it should gain in relevance and importance, over time.

     

    80. Any response to IMF's observations on Debt Sustainability including external debt in its 2014 Article IV Consultation Staff Report?

    IMF has favourably commented on debt sustainability, and it will improve further in coming years.

     

    81. Are there controls in for companies that acquire SMEs, to stop monopoly and hinder SME development?

    Market forces determine market action, but these must be within the regulations and the law.

     

    82. Any comment on private sector credit growth?

    It should pick-up.

     

    83. Don't you think with the prevailing expansionary monetary policy stance will lead to an asset bubble during the next 2 years?

    No, we are confident our policies are appropriate.

     

    84. In ATM even we select language as SINHALA/TAMIL receipts come in English. What’s CBSL position on language policy?

    Sometimes, technology changes take a little time, to fulfil all requirements.

     

    85. How will be the borrowing rates reductions for the special projects such as hotels, education etc..?

    That’s a decision for the banks, based on their risk appetite.

     

    86. What would be future of the saving deposits interest rates?

    Although the deposit interest rates may be low, the capital is well preserved now, unlike in the past.

     

    87. Any final decision on remaining cases of reducing the stakes in banks which are over 15% limit?

    Time limits have been given to Banks to comply with this direction.

     

    88. Thanks to financial sector consolidation, some small financial companies with weak financials are attracting extremely good prices. Isn’t this a distortion?

    Prices are determined by the buyers and sellers.

     

    89. What is the current situation of Financial Sector Consolidation in Sri Lanka?

    Progress is satisfactory and we give a monthly update.

     

    90. Any plans if Sri Lanka faces a middle income trap at some point?

    We are confident we can progress without getting trapped.

     

    91. Why don't you conduct a short course for Post and Pre Audit Methodology on Construction Field at the CBSL study center ?

    Thank you for the suggestion, which we would consider.

     

    92. When we beg for debts they are trying to rule our country, it is pure neo colonialism like IMF, we should stand own.

    We have now developed many financing options, and hence our dependence on IMF is low.

     

    93. Has the government quantified the impact on the on-going drought? What is likely to be the impact on GDP? And why?

    Weather changes have already been factored, and hence impact on GDP estimates would not be material.

     

    94. Governor, what are the steps that you take to increase the no. of investors to invest in CSE?

    When the overall economy does well, more investors are attracted.

     

    95. Is there any salary increase for Sri Lanka Public & Private sector employees from 2014 Budget?

    In the past, there have been salary increases proposed in every budget, which is likely to prevail in 2014 too.

     

    96. Please reduce all interest rates for loans in commercial banks.

    That would happen gradually up to a certain level.

     

    97. SL condo market is booming. And show signs of a bubble. But we still don’t have an official HOUSE PRICE INDEX. Your view?

    It is a useful index and is being developed now.

     

    98. Why Sri Lankan Government not in equity markets like GIC and TEMASEK. Small country like us need couple big government player enter in equity Market ?

    Thank you for your suggestion. We will give it due consideration.

     

    99. Do we need to be ready for a recession in Sri Lanka any soon?

    That’s not likely, but we always need to be watchful.

     

    100. Is recent Fuel & Electricity rates reduction temporary move? How this affect to the economy?

    It is sustainable and it will make inflation come down, and businesses to be more competitive.

     

    101. We have seen a new innovative way of cutting policy rates at yesterday's announcement, where else we find such moves?

    We do what we think is appropriate for Sri Lanka. In recent times, others have also followed our moves.

     

    102. Dear Sir, would you be able to help me out with a query on investments with a primary dealer ?

    Please contact our Public Debt Department who would be happy to help you.

     

    103. What are the benefits & advantages of recent Swap Exchange Agreement between Sri Lanka & China ?

    It will stabilize our external sector further.

     

    104. Is online currency trading allowed? Can we freely send money out and bring in?

    Forex transactions are permitted only if there is an underlying transaction.

     

    105. Why are you getting this much loans from other countries? It's not good for the future right?

    We take loans carefully, after extensive evaluation.

     

    106. If we elect a new president in the coming election, how it will affect the plans of?

    Continuation of the economic policies may be affected, and that would affect the economy adversely.

     

    107. How do you justify the commercial loans obtained by govt. at higher interest rates for development projects?

    Govt. is now borrowing at much lower rates than in the past, due to the improving conditions.

     

    108. What will be the inflation and GDP in next five years. What are the industries you think we need to tap more?

    By 2020, GDP would reach US$ 150 bn., and inflation would be about 4% and Five hubs would play a vital role.

     

    109. Is the Rupee still overvalued against USD? And what's will be the case in three months’ time ?

    The Rupee is stable and competitive.

     

    110. Will & if so when would there ever be a possibility for customers to transact at any ATM free of charge irrespective of bank they've a/c with?

    We are trying to connect all ATMs to a single switch, and that should be a reality soon.

     

    111. Does it take a long time to restructuring CIFL?

    We are working on it diligently and the process would be faster if it is not interrupted.

     

    112. If SL Businesses accept BitCoins or individuals use BitCoins, are they breaking CBSL regulations?

    The only legal tender within Sri Lanka is the SL Rupee.

     

     

    (KH)

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