CBSL recommends 8 policy measures | Daily News

CBSL recommends 8 policy measures

To overcome economic challenges
Removes upward caps imposed on interest rates for credit cards, ODs & pawning facilities
SDFR & SLFR increased by 100 basis points

The Monetary Board of the Central Bank of Sri Lanka (CBSL) has increased the Standing Deposit Facility Rate and the Standing Lending Facility Rate of the Central Bank by 100 basis points each, to 6.50 per cent and 7.50 per cent, respectively;

The CBSL has revised upwards the caps imposed on interest rates applicable to credit cards to 20 per cent per annum, on pre-arranged temporary overdrafts to 18 per cent per annum, and on pawning facilities to 12 per cent per annum.

“We believe that there is a further tightening necessary and that tightening has to come in several forms and not all would be through the actions of the Central Bank.

That’s why we have done a policy interest rates hike of 100 basis points which is one of the higher range of policy interest rate increases in the last 15-20 years. Nevertheless, we think it has to be supplemented with other forms of measures which need to be taken by the Government as well.” Central Bank Governor Ajith Nivard Cabraal said.

Governor Cabraal further said, “We are sensitive to the fact that some of those measures may be difficult to implement as well as could pose a further burden and additional difficulties. But in the overall context of the economy, it is necessary to implement some of those measures.

The CBSL has also requested the Government to seriously consider those measures in the interest of ensuring the stability of the economy.

The CBSL has urged the Government in its policy statement that certain changes must be carried out and has brought it as an eight-point package.

Accordingly, the CBSL urges the Government to discourage non-essential, non-urgent imports based on the previous recommendations made by them.

“We still see a large number of items which are imported into the country, which can not be considered to be essential.”

“And at the same time, we don’t see any dearth of those items in supermarkets either.”

“We have encouraged the Government to take certain measures to discourage some of those imports. So there would be greater resource availability for the essential items as well.”

He emphasised the need to increase fuel prices and electricity tariffs to reflect the cost, as well as incentivize foreign remittance.

Apart from that, the CBSL has requested the Government to implement certain energy conservation methods whilst accelerating the move towards renewable energy.

CBSL has also recommended to the Government that there should be a steady increase in certain taxes to ensure that there is a greater reliance on tax income and not to rely on borrowing alone.

“We have also asked for the mobilising of foreign financing and non-debt forex inflows. We are happy to see that there have been certain efforts being taken to reduce our reliance on international sovereign bonds.

Moreover, the Government and the CBSL are working towards having new Inflows such as swaps, Government to Government loans, non-debt inflows through other means.

Apart from that, the CBSL has requested the Government to monetize certain non-strategic and underutilized assets and to postpone some non-essential, non-urgent capital projects in the country.

Global and domestic developments (supply chain disruptions and rising commodity prices, as well as in the domestic front, mainly power and supply interruptions.) have posed challenges to the recovery of the Sri Lankan economy these factors have somewhat affected economic activity.

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