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    SL economy awaits strong rebound in 2H-CBSL

    z_p17-SL-economyBased on incoming data, the Central Bank of Sri Lanka (CBSL) expects that the Sri Lankan economy will strongly rebound in the second half of the year, Central Bank Governor Prof. W. D. Lakshman said.

    Prof. Lakshman speaking at the Monetary Policy Review press conference held at the CBSL Auditorium yesterday opined that the Monetary Board decision to reduce policy interest rates further by considerable margin of 100 basis points has been taken with the expectations such as banks would pass the benefits to their customers by bringing their lending rates down and making use of the increased levels of available liquidity to provide loans to borrowers at low interest cost thereby facilitating economic revival and growth.

    “Working cautiously, the Board has unanimously agreed that the need of the hour is to revive the economy in lower lending rate and enhance credit growth. We also strongly believe economic revival and to sustain economic growth requires development friendly and productivity enhancing reforms and improving business confidence. However, it is unfortunate to see the Sri Lankan economy being reclassified as a lower middle income economy. We’re confident that within a short period of time these setbacks will be reversed and a symbolic upper middle income level will be regained,” Prof. Lakshman said.

    He further said that as per the monetary policy decisions, CBSL has taken measures to increase liquidity in the system and bring down statutory reserve ratios to its historic low level.

    “We’ve also eased the regulatory burden on the banks enabling them to lend to Covid affected businesses. The well anchored levels of inflation and inflation expectations which prevailed have made the adoption of monetary measures mentioned above. Measures taken with the support of the Government has allowed us to maintain a stable exchange rate while preserving Gross Official Reserves.

    Export earnings and earnings from tourism, workers’ remittances and debt and capital flows have been below expectations from the beginning of the year.

    However, the restrictions on imports along with gradually recovering foreign exchange inflows have helped us to keep the exchange value of the rupee stable during the past three months,” Prof. Lakshman said.

    He said the stability of the financial system has been maintained and CBSL is engaged in regular dialogues with financial intuitions to help revive the economy.

    “In the meantime, we continue to decisively deal with legacy issues in relation to certain financial companies in order to protect depositors.”

    Governor Prof. Lakshman added that many other social, political, fiscal and other policy actions as well non policy developments ought to come together to hoist the economy on to a higher rank and more sustainable growth platform.

    Courtesy – Daily News

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