The Central Bank has not put forward a single proposal to rebuild the economy
CB cuts SRR (proportion of deposit liabilities that banks are required to keep as cash deposits with CB) to increase credit flow to economy
By Lahiru Pothmulla
President Gotabaya Rajapaksa criticized Central Bank officials for failing to extend their support to the government’s proposals for economic revival, unlike the Central Banks of other countries.
During a meeting with the officials led by the Governor of the Central Bank held at the Presidential Secretariat yesterday, the President said Central Banks in leading countries such as the United States, Japan and Australia as well as in small countries have put in place required mechanisms to revive economies in their respective countries.
“Sadly, the Central Bank of ours has not put forward a single proposal to rebuild the economy. The Government owes a large sum of money to various institutes for the services and products they supplied during the past couple of years. The Central Bank had ignored the proposal made by the President to provide Rs. 150 billion to banks by accepting the outstanding due as collateral. The Government will have to take the blame for the economic slowdown due to this serious negligence of duty on the part of the Central Bank,” he said.
He also said the officials who worked at the Central Bank during the scandalous bond scam still hold their positions and that these officials have failed to extend cooperation to rebuild the country.
“We cannot let the health crisis lead to an economic crisis. Not only have Central Banks in big countries but also in small countries have taken many crucial steps. The Federal Reserve in the US has formulated a USD 600 billion programme. Today, the Central Banks in Australia and Japan too have joined. Similarly, Central Banks in small neighbouring countries of ours have commenced planned programmes,” he said.
Look at this headline. “The AFED (Arab Forum for Environment and Development) commits to use a full range of tools to help the economy through unprecedented time”. What is the tool we have used? We have used nothing. Our Central Bank has not done anything towards this. Monetary and Fiscal Policy has been formulated by the Central Bank. That should be done in accordance with the economic policy of the President of the country.
You have several tools that can be used. Those tools have to be utilized. However, our Central Bank does not use a single tool. It just stays idle. We asked to release Rs. 150 billion to banks. This is not a fault of the business. The Government owes a huge sum of money to companies due to mismanagement in the past. Let this money be kept as a security for banks to release loans to them. Then they can run the economy. This is a money circulation process. This is a very simple tactic and this is a basic economic principle. But, what are you doing? The Governments have to take the blame for your conduct. You do not monitor. Look at the status of finance companies.
It is your responsibility to regularize and monitor these companies. However, you have failed in your task.
- We cannot let the health crisis lead to an economic crisis
- It is your responsibility to regularize and monitor these companies
CB reduces Statutory Reserve Ratio
Subsequent to the meeting, the Monetary Board of the Central Bank of Sri Lanka yesterday decided to reduce the Statutory Reserve Ratio-SRR(the proportion of the deposit liabilities that commercial banks are required to keep as a cash deposit with the Central Bank)applicable on all rupee deposit liabilities of licensed commercial banks (LCBs) by 200 basis points to 2.00 per cent, with effect from the reserve maintenance period that commenced yesterday.
This reduction in the SRR injects around Rs.115 billion of additional liquidity to the domestic money market, enabling the financial system to expedite credit flows to the economy, while reducing the cost of funds of LCBs.