Central Bank to adapt monetary, forex control and financial sector reforms
Sri Lanka is committed to continue reforms that have helped turnaround the negative effects seen in the wake of the economic crisis while taking credible measures to improve fiscal sector performance, Central Bank Governor Nandalal Weerasinghe elucidated.
Delivering the statement on monetary and financial sector policies for 2024 and beyond at a conference in Colombo this week, he noted that the Central Bank would make some changes in monetary policy implementation, foreign exchange control financial sector legal framework and the employee’s provident fund investments.
Measures will be taken to further strengthen external sector buffers, while ensuring price stability and financial system stability, the Central Bank Governor said.
The recent tax and tariff increases would exert supply-side pressures on inflation during the year, he conceded.
“However, since this rise in inflation is due to administrative measures, a change in the course of monetary policy action may not be warranted as inflation expectations remain well-anchored,” he pointed out.
The Central Bank is contemplating a single policy rate mechanism towards a paradigm shift in monetary policy stance moving away from current policy of using two interest rates, the standing deposit facility rate and the standing lending facility rate.
With a view to enhancing the effectiveness of monetary policy implementation as well as catering the current and future developments, a user-friendly system for Open Market Operations (OMOs) would be introduced, with a smooth transition to the new auction system by 2025.
Further, an OMO auction schedule will be introduced in 2024 that helps create certainty on liquidity management among market participants.
The ongoing exchange controls will be eased to facilitate and revitalise economic activities, the governor said disclosing that the Foreign Exchange Act will also be amended in early 2024.
The Central Bank would review the existing framework of Statutory Reserve Requirement (SRR) in line with international best practices.
This would enhance flexibility for banks in managing reserves and support the payment system, while optimising the usage of SRR as a monetary policy instrument.
“To address the increased levels of impaired assets in licensed banks and enhance their role in the recovery of businesses, particularly Small and Medium Enterprises (SMEs) and corporates, the Central Bank is set to issue comprehensive guidelines for the establishment of Business Revival Units,” he said.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!