Header Ad

Sri Lanka details terms of Rs50bn central bank re-financed Coronavirus facility

ECONOMYNEXT – Sri Lanka’s central bank has detailed the use of a 50 billion rupee facility for Coronavirus hit business set up along the lines of a re-financed facilities set up by the Reserve Bank of Zimbabwe about 15 years ago.

The RBZ set up a Productive Sector Facility (PSF) and Agricultural Sector Enhancement Facility (ASPEF) about 15 years ago as well as a fund for state enterprises, triggering severe foreign exchange shortages.

Before the crisis began, the central bank also injected 24 billion rupees in the banking system through a profit transfer, 50 billion rupees through outright money printing, another 50 billion rupees through reserve ratio cut, despite having a soft pegged exchange rate and the currency is already under pressure.

Sri Lanka is now restricting imports and the rupee has already fallen to around 192 to the US dollar, and the credibility in the peg has been lost.

In Sri Lanka there is a widespread belief that money instability is caused by imports not liquidity injections.

The full statement is reproduced below:

CENTRAL BANK OF SRI LANKA DECIDES TO ESTABLISH A RUPEES 50 BILLION, SIX MONTH RE-FINANCING FACILITY AND ISSUES INSTRUCTIONS
TO FINANCIAL INSTITUTIONS TO SUPPORT COVID-19 HIT BUSINESSES AND INDIVIDUALS

The Central Bank of Sri Lanka (CBSL) has decided to set up a Re-financing Facility to implement the decisions taken by the Cabinet of Ministers on 20.03.2020 to introduce a wide range of concessions including a debt moratorium (capital and interest) and a working capital loan for COVID-19 hit businesses and individuals. Licensed commercial banks, licensed specialised banks, licensed finance companies and specialised leasing companies (Financial Institutions) are eligible to participate in this Re-financing Facility commencing 25.03.2020 and offer the concessions announced.

Highlights of the concessions and the refinancing facility are as follows.

1. General Terms and Conditions

Advertisement

 

 

 

1.1 The businesses/sectors eligible to avail of concessions:

(a) Small and Medium Enterprises (SMEs) engaged in business sectors such as manufacturing, services, agriculture (including processing), construction, value addition and trading businesses including authorised domestic pharmaceutical suppliers with turnover below Rs. 1 bn.

(b) Those affected by COVID-19 related repercussions: