Oct 04, 2011 (LBO) – Policymakers must look at an economy as a whole and not focus only on certain aspects, Sri Lankan central bank governor Nivard Cabraal said. Factors like the exchange rate, interest rates, unemployment and growth were all interconnected, he told a meeting of the Asian Bankers Association in Colombo Tuesday.
Concern has mounted over Sri Lanka’s exchange rate policy amid reserve losses to defend a dollar peg.
There was a need for policy consistency and clarity in the economy which helps bring confidence, the most important factor, Cabraal said.
“From a banker’s perspective, the most important factor in banking is confidence – that’s also the most forgotten factor. The key is to act decisively, with confidence.”
Cabraal also said policy consistency and clarity shown by those in charge of an economy helps build confidence.
Policymakers must manage an economy by taking several different factors into account and maintaining a balance, he also said.
“There’s also a need to look at the economy as a whole – often people talk of one or two items like the exchange rate, interest rates, unemployment, or of growth,” Cabraal