Sri Lanka will not curb imports to maintain peg: CB Governor

Feb 01, 2012 (LBO) - Sri Lanka will not curb imports to stabilize the exchange rate, Central Bank Governor Nivard Cabraal said as a peg with the US dollar came under pressure from strong credit growth.







"There has been an exponential growth in imports such as vehicles and gold and this is a reflection of the peace dividend," Cabraal told a group of foreign corresponds at a meeting at the residence of Sri Lanka's president Tuesday.

"We are watchful of the trade deficit.

But we don't however want to curb imports as it is important to keep the growth momentum going.



"

Sri Lanka has a chronic large trade deficit because the country gets money through remittances and net government borrowings in addition to exports which trigger imports.

In previous balance of payments crises, Sri Lanka had raised import duties on various items.

Automobiles which elected rulers get completely duty free and senior state workers get at tax slashed prices have been a favourite target.

Other goods include foods and non-food items that elected rulers and senior state workers deem 'luxury goods' for the citizenry.

While import curbs on specific goods can curb the import of that good, analysts point out th