ECONOMYNEXT- Sri Lanka’s Central Bank Governor W. D. Lakshman called on financial institutions to not speculate and cause panic in the markets while passing on the benefits of lower lending rates to customers after an emergency policy rate and statutory reserve ratio (SRR) cut over the coronavirus pandemic.
“We have requested all financial institutions led by licensed commercial banks to pass to the market the full benefit of the cumulative reduction of 75 basis points in policy interest rates thus far during the year as well as the reduced cost of funds through the reduction in SRR without any delay,” he said.
“We have also requested financial institutions to refrain from engaging in speculative activity which could lead to panic in the financial market.”
The government declared Monday through Thursday as holidays, although banks, food distribution and essential services such as health continue to operate.
Lakshman said the Sri Lankan economy has begun a turnaround due to fiscal and monetary stimulus following the presidential election, after a long period of subdued growth.
“However, it is increasingly evident that domestic economic activity during the year 2020 would continue to be affected by the spread of the pandemic,” he said.
On Monday, the central bank in an emergency move cut the policy rates by 25 basis points.
Further, the SRR was cut by 1 basis point, which could add another 50 billion rupees in liquidity to money markets unless a 40 billion rupee liquidity injection on Friday is not mopped up.
The central bank and Treasury are coordinating efforts to ensure the economic impact from the pandemic is mitigated, and are observing the local and global developments closely.
He also said the central bank is ensuring that cash and electronic transactions are not disrupted, and liabilities of the state and central bank are settled normally.
So far, 29 coronavirus cases have been reported in Sri Lanka, including the first case of a Chinese national who had recovered and departed in February. (Colombo/Mar17/2020)