Rebasing of GDP figures, a political gimmick: Cabraal

Published : 9:48 am  July 15, 2015 | No comments so far |  |  (522) reads | 

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By Chandeepa Wettasinghe
A newly established social platform, the ‘Vidvath Jana Pawura’; comprising of officials from the past regime, is protesting the economic rebasing undertaken last week, while saying that Sri Lanka’s economy has taken a major downturn following the regime change on January 8.
“The new government has rebased the economy saying that the prior numbers were incorrect. They now say the growth has reduced from 7.5 percent to 4.5 percent. This is the first time that a minister has said this.

Usually it is the Director General of the Census and Statistics Department who says this,” former Central Bank Governor Ajith Nivard Cabraal, who is leading the new platform, said.

He noted that Policy Planning and Economic Affairs Deputy Minister Dr. Harsha de Silva announcing these numbers represents a violation of independent processes, and added that Dr. de Silva did not inform the public about the positives in the economy highlighted in the rebasing process.

However, during the previous regime, there were serious allegations with regards to the massaging of economic data by the Census and Statistics Department at the behest of the Central Bank.
But ironically, the new government, who questioned the credibility of the economic figures when they were in the opposition, didn’t refute the statistics when they came to power in January.

As a result, a much needed comprehensive audit was not carried out on the economy to learn its real shape following the election of the new government.
The rebased figures were initially disseminated by the department last week, and Dr. de Silva held a press conference later to discuss the statistics, at which he praised the previous regime for improving areas such as the budget deficit and debt to GDP ratio, while noting the growth decline.

Cabraal said that it is unfair to judge the economic growth with a rebased year of 2010.
“Because, 2012 was the worst year for the economy since 2009 and it has brought down the figure. We had to do a lot of intervention in interest rates that year, but that doesn’t paint the true picture of growth which was experienced since 2009. This was done to bring down the growth in 2013 and 2014,” he said, and added that it was a ‘jilmart’.

However, it is a standard practice to rebase an economy in regular intervals. Further, Institute of Policy Studies Chairman and economist Prof. Razeen Sally said that the recent construction-led growth has also painted a false picture, and skewed macroeconomic fundamentals.
Meanwhile, Cabraal expressed that Sri Lanka’s economy is taking a turn for the worse, as investors are not willing to enter the country anymore.

“The stock market has fallen to levels below those when President Mahinda Rajapaksa handed over the country. The rupee has weakened. When we earlier went for bonds of Rs.1 billion, we got bids up to Rs.3-4 billion. Now the Finance Ministry can only attract Rs. 1.6 billion. This shows the lack of confidence in Sri Lanka.There aren’t any new projects being done,” he noted.
However, wider consensus is that investors are waiting for elections to be over.

Cabraal noted that the bond scandal had cost the country Rs.2 billion on the day itself, while it has had a trickledown effect on all other state borrowings, amounting to over Rs.59 billion.

However, Verite Research a Colombo-based think tank in a recent research article in Mirror Business said the real loss was just Rs.900 million, while the trickledown effect is not large. It said that the greatest loss was the credibility of the Central Bank.
The current government’s lack of transparency in the issue has been disheartening.

Meanwhile, Cabraal defended all economic moves undertaken by the previous regime. Recently, ex-President Rajapaksa admitted that his regime had made some mistakes. Whether this included actions of the Central Bank and the Treasury was not clarified.