Say support, not subsidy: Nivard Cabraal

Say support, not subsidy: Nivard Cabraal

By Roy Silva

Sri Lanka should use the word ‘support’ instead of ‘subsidy’, for certain agencies and countries are averse to that term, said Dr. Ajith Nivard Cabraal, Governor of the Central Bank on Friday.

All agencies the world over, particularly the IMF, do not like subsidies in emerging countries, but do not see too much wrong it being done in some advanced countries, said the Central Bank governor addressing the annual general meeting of the Planters’ Association.

“It is only in our country that we use the word ‘subsidy’. I have been to various fora and wherever the Americans speak about the huge subsidies that they give, they always use the work ‘support’. And they tell us, ‘Don’t give subsidies, but we give support and support is OK and subsidies are not.’ In that sense we also need to use the right terminology which does not seem obnoxious and I have encouraged all our stakeholders to use the word ‘support’ so that when we discuss matters with all the agencies all over the world, particularly the IMF, who generally do not like to see support schemes being
implemented by the emerging countries but don’t see too much wrong when it is being done by some of the
advanced countries, we got to use the same terminology that does not really make too much of a problem for everyone,” said Dr. Cabraal.

However, Sri Lanka’s fertilizer support scheme has been one that has given extraordinary results to the country. Sri Lanka has ensured that food security in the country is maintained, said Dr. Cabraal.

Making his observations on the tea industry, he said that the fact that Sri Lanka had tea exports to the tune of 314 million kilos, the highest ever, at an export price of US$ 1.735 billion is indeed extremely useful for the management of the finances of the country. He thanked the planters for delivering such value to the country.

The CB governor also noted that Sri Lanka had been able to export 68% of its tea in value added form and said it was an achievement that all Sri Lankans should be proud of.

According to the Central Bank governor, the overall segment of the agricultural sector as a part of the country’s GDP is dwindling. In 1948, about 60% of Sri Lanka’s GDP came from the plantation and agricultural sector. Today, it has reduced to 12%.

Not that it has reduced due to less production, but because the rest of the other areas had grown. And we need to ensure that the industries that are supported by agriculture are continuously supported so that tea, rubber, coconut and all the other crops could be the feeder to the industries that Sri Lanka will also have to provide in order to sustain itself
for the future.

“I was pleased that about US$ 2,000 million is churned out by the plantation sector by way of exports and when compared to the actual value addition to our country, it’s one of the highest ever and in that context it is an extremely important industry for our country,” he noted.

The government considered plantations as an extremely important industry. During the last budget, President Mahinda Rajapaksa said that a fund would be created in all banks, where the profits of the banks would be retained for future long term activity. Recently we issued instructions for the usage of those funds for support of replanting as well as new plantings. There is a pool of resources that had been earmarked, particularly for this kind of long term gestation projects, so that banks also have a pool of resources which can be supportive of the long term gestation projects like replanting,
said Dr. Cabraal.

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