Nov 02, 2011 (LBO) – Sri Lanka’s banking regulator has urged banks to borrow abroad using improved credit ratings and precedents set by sovereign bonds as local savings were inadequate to raise funds needed to maintain high growth. “The rating must be relevant, not just locally, but to the person in Boston, Japan and Singapore. They must feel comfortable in investing in your bank. That’s how you test your balance sheet.” Central bank governor Nivard Cabraal said economic growth has begun to accelerate with the end of the island’s 30-year ethnic war in 2009 but it would be tough to maintain the pace without external funding and investment.
“It’s not easy to maintain eight percent-plus growth continuously for four or five years,” he told a bank directors’ symposium organised by the regulator and attended by around 200 chairmen, directors and chief executives of 33 licensed banks.
“We have, for the first time in our history, been doing it for two years in succession. It’s going to be tough and needs clear interventions,” he said.
Cabraal said the island’s macro-economic fundamentals had improved with lower inflation, interest rates, budget deficits and unemployment, making it more attractive for investors.