CB Governor predicts lesser economic impact from latest COVID-19 wave
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Central Bank Governor Prof. W.D. Lakshman
Dispelling expert views of a severe impact on the economy in the third wave of COVID-19, Central Bank Governor W.D. Lakshman says that the economic impact of the current rising contagion is less than the two previous waves.
Addressing the online monetary policy review media conference on Thursday, he noted that restriction of mobility in affected areas, ongoing vaccination programme and employees working from home will mitigate the impact.
However he said government tax revenues, public expenditure and exports could be disrupted by the pandemic.
The Central Bank is continuing the maintenance of the current accommodative monetary policy stance to support the sustained revival of the economy.
He emphasised the need of continuing fiscal and monetary support to place the recovery process on a firm footing.
Inflation is expected to remain broadly within the desired target range of 4-6 percent during the remainder of the year.
Sri Lanka has entered into a swap agreement with the People’s Bank of China, a US$ 500 million facility from the China Development Bank and funding from AIIB received by state banks.
The Finance Ministry has signed an agreement with the EXIM Bank of Korea to obtain a $500 million loan for development activities.
Negotiations are under way with neighbouring central banks and West Asian counterparts; he said adding that an IMF facility of $780 million under Special Drawing Rights is also expected.
The IMF executive director board will take up this matter in June he disclosed and the money will be disbursed by August, he revealed.
The China Development Bank has already provided a $500 million loan while Colombo Port City Commission will attract more foreign investment in to the country, he added.
International financial agencies such as the IFC have granted funding to the Sri Lankan corporate and financial sector, he said adding that the government has secured financial assistance from the ADB and the World Bank.
The Monetary Board of the Central Bank will ease regulations and guidelines permitting the corporate sector to borrow more freely from international capital markets and take advantage of the low-interest rates.
“We observed Sri Lankan International Sovereign Bonds appreciating by 20 percent over all maturities,” Prof. Lakshman added.
The increase in import costs were mainly due to high fuel prices but exports and worker remittances have been at a considerable high level.
Director of Economic Research Dr. Chandranath Amarasekara said foreign remittances are expected to be higher than last year, though projections will be carefully reviewed and revised in accordance with economic situation in the coming months.
“We are still hopeful there will be an increase in tourism arrivals once the situation settles. We are looking at a bleaker picture than before the onset of the wave,” he added.
Answering a question raised by a journalist, Deputy Governor Yvette Fernando noted the Central Bank will have to think about depositors and sustaining banks before taking policy decisions on extending relief for borrowers.
She disclosed that moratoriums have been given to affected persons and enterprises in sectors for six months to one year and the period has already lapsed.
This moratorium may not be extended as the country is now under new normal living with COVID-19 except for the transport and leisure sectors, she said adding that the Central Bank is ready to consider complaints from affected borrowers on a case-by-case basis. (BS)