Central Bank to continue policy mix in 2021 | Daily News

Central Bank to continue policy mix in 2021

PayPal inward payment services in Lanka soon

The Central Bank of Sri Lanka is aiming to continue the current policy mix in 2021. The governor noted that interest rates (both borrowing and saving) would remain in single-digit levels.

The country has been able to obtain arrangements with the Reserve Bank of India and the US Federal Reserve to ensure foreign currency liquidity domestically.

CBSL Governor Prof. W D Lakshman noted that the foreign currency debt crisis was developed in his predecessor’s tenure. He noted that between 2009-2014 foreign borrowing through ISBs amounted to US$ 5 billion while between 2015-2019 it rose to US$ 12.05 billion.

Prof. Lakshman was speaking at the Central Bank on January 4 at the Annual Monetary Policy Road Map. The monetary board is confident of maintaining the inflation target in the medium term.

The Monetary Board has approved a new regulatory body underneath them called the Microfinance and Credit Regulatory Authority to regulate money-lending institutions. The governor assured the public that PayPal inward payment services would shortly be available in Sri Lanka.

The government will be attempting to revive development banking in Sri Lanka by merging the State Mortgage and Investment Bank, the Housing Development Finance Corporation, and Pradeshiya Sanwardana Bank to form a National Development Banking Corporation.

The governor called on the capital markets and the insurance industry to create products to counter the low real savings rates. The governor noted that the largest capital market in the country remained the government securities market and called on the Colombo Stock Exchange to improve its offering. He said, “the country can no longer afford a high-interest rate environment.”

The CBSL is to be the first to implement a digitized web-based auction and issuance system for debt securities in the country. Accordingly, a Electronic Trading Platform and a Central Counterparty Clearing House for Government securities and domestic foreign exchange transactions will be developed.

A new Financial Consumer Protection Act is to be enacted. An International Transactions Reporting System will be implemented to monitor cross border currency flows.

The Central Bank and the government will jointly create the framework governing the financial services in the Port City. He said, “Such joint work will ensure the seamless cohabitation of the national financial sector regulatory framework with the expected special legislation covering the international financial centre in the Port City.”

The Central Bank remained a net purchaser of currency in 2020. A Rs 2,000 note will be introduced and be made available more widely. The EPF investment guidelines are to be revised. Restrictions on non-essential imports and certain classes of outward investments will remain. The economy is expected to have contracted 3.9% in 2020. The Central Bank will publish a Monetary Policy Report in 2021.