An Echelon Media Company
Friday June 14th, 2024

Sri Lanka to start directed lending, ceiling 7-pct rate for wage earner housing loans

ECONOMYNEXT – Sri Lanka will start directed lending under the policy of the current administration and will mandate a ceiling 7 percent rate for housing loans of salaries workers the central bank said.

“The Board also recognised the need to promote economic sectors with higher growth and earning potential, and in this regard, decided to introduce lending targets in the near future for selected sectors in conformity with the policies of the Government,” the central bank said in its November 2020 monetary policy statement.

A 7 percent ceiling housing rate mortgage rate will also be mandated for at least 5 years.

“Furthermore, complementing the concessional loans schemes proposed by the Government in the Budget 2021, the Monetary Board decided to introduce a maximum interest rate on mortgage backed housing loans obtained by salaried employees from licensed banks,”

“Accordingly, licensed banks will be made to charge only 7 per cent per annum for such loans, at least for the first five years of the loan tenure.

The remaining tenure of the loan is to be charged at the monthly Average Weighted Prime Lending Rate (AWPR) plus a margin of up to 1 percentage point. Directions to this effect will be issued to licensed banks shortly.

It is not clear whether housing loan customers will lose fixed rate loans from now on and be exposed to severe interest rate volatility in the future.

Due to central bank liquidity injections made to keep rates down when private credit picks up, Sri Lanka has a history of currency crises, which triggers steep corrective rate spikes.

Under the last administration Sri Lanka began to resort to sweeping central planning of interest rates with then Governor Indrajith Coomaraswamy mandating both lending and deposit price controls.

The central bank kept the policy rate at which new money is injected to the banking system at 5.5 percent and the rate at which excess liquidity is withdrawn at 4.50 percent.

The rate setting monetary board said it was “of the view that the prevailing surplus liquidity conditions provide sufficient space for a further reduction in market lending rates without an adjustment to policy interest rates.”

Tens of billions of rupees has been injected through debt monetization at various tenors of the yield curve keeping excess liquidity around 15 to 20 percent of the monetary base or around 150 to 180 billion rupees for several months.

Some of the liquidity has also come from dollar purchases amid weak overall domestic credit.

But some of the maturing foreign debt has been settled with forex reserve appropriations. (Colombo/Nov26/2020)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka opposition leader proposes Grama Rajya system in addition to 13A

Opposition leader Sajith Premadasa (r) – File photo

ECONOMYNEXT — Sri Lanka opposition leader Sajith Premadasa has proposed devolving power to the village level through a Grama Rajya system in addition to implementing the 13th amendment to the constitution.

Speaking at an event in Jaffna on on Wednesday June 12, Premadasa said all provinces will benefit from the 13th amendment.

“Whatever one’s ethnicity, religion, status or region, this country has citizens of equal level. They’re all Sri Lankan citizens.

“There is no division or grouping.  As we give you and every other province what you should be given through the 13th amendment, we must implement a Grama Rajya system,” Premadasa said, addressing a crowd of school children and other attendees.

Premadasa’s assurance of implementing the 13th amendment has already drawn some protest in the south.

A collective of civil society organisations held a protest outside the office of the leader of the opposition in Colombo on Thursday June 12.

Calling itself the ‘Coalition Against Partition of Sri Lanka’, the group carrying national flags marched up to the opposition leader’s office Thursday June 13 morning and demonstrated against the full implementation of the 13th amendment.

“We arrived here today to hand over a missive against devolving police powers, land powers and judicial powers. If Mr Premadasa is inside, come outside,” Jamuni Kamantha Thushara, Chairman of the Citizen’s Movement Against Fraud, Corruption, and Waste, was seen declaring at the site.

“First of all, tell us what we stand to achieve by dividing and giving away the north and east,” said another protestor, warning against bringing the 13th amendment “anywhere here (paththa palaathe)”.

A police officer at the scene the protestors that a secretary to the opposition leader was ready to accept their letter.

“In Kilonochchi, he says the 13th amendment will be implemented. The votes in the north are going to be decisive this election. To win those votes, President Ranil Wickremesinghe, Sajith and Anura Kumara Dissanayake all say they will implement the 13th. We will not allow this country to be divided into nine pieces,” said Thushara.

Ven Balangoda Kassapa Thero, who was arrested on June 06 during a protest against the new Electricity Act, was also seen at Thursday’s protest. The Buddhist monk requested for a debate with Premadasa on the matter of the 13th amendment. (Colombo/Jun12/2024)

Continue Reading

Sri Lanka rupee closes flat at 303.85/95 to US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed broadly flat at 303.85/95 to the US dollar on Thursday, from 303.80/304.00 to the dollar the previous day, dealers said. Bond yields were down.

A bond maturing on 15.12.2026 closed at 10.00/30 percent, down from 10.20/40 percent.

A bond maturing on 15.10.2027 closed at 10.60/75 percent.

A bond maturing on 01.07.2028 closed at 11.00/15 percent, down from 11.15/40 percent.

A bond maturing on 15.09.2029 closed at 11.80/85 percent.

A bond maturing on 15.05.2030 closed at 11.85/12.05 percent, down from 11.90/12.05 percent.

A bond maturing on 01.10.2032 closed stable at 11.95/12.15 percent. (Colombo/Jun13/2024)

Continue Reading

Sri Lanka sells Rs295bn in 2027 to 2031 bonds

ECONOMYNEXT – Sri Lanka has sold 295 billion rupees in 2027, 2029 and 2031 bonds, data from the state debt office showed.

The debt office sold an offered 60 billion rupees of 15 October 2027 at an average yield of 10.30 percent.

All offered 125 billion rupees of 15 September 2029 bonds were sold at 11.00 percent.

All 110 billion rupees offered of 01 December 2031 bonds were sold at 12.00 percent. (Colombo/May13/2024)

Continue Reading