Sri Lanka needs low inflation, good institutions and governance to grow: economists

Sept 20, 2008 (LBO) – Sri Lanka needs good institutions, governance and economic tranquility that come with low inflation to grow, senior economists said, at a time when the island is suffering from the highest inflation in its history. The head of the Sri Lanka Economic Association (SLEA) A D V de S Indraratna said often the question was asked whether high inflation was inevitable with high growth.

Not Inevitable

“The answer is a firm no,” Indraratna said, firing the opening salvo at the association’s annual sessions themed on ‘Inflation, Competitiveness and Growth.’

“Monetary and fiscal tools are available to keep inflation low. By managing budgets and monetary policy we can keep inflation low,” he said.

In April 2008, the island’s most widely watched Colombo Consumer Price Index (CCPI) hit 29.9 percent, the highest since the creation of a central bank with money printing powers in 1950 plunged the country into high inflation and currency depreciation.

Before that the island had exchange rate stability and low inflation under a currency board arrangement.

Indraratna said the country had managed to record low inflation in the 1960s, and in the 1970s inflation had been officially suppressed with pr