Home » Former Governor Cabraal asks CBSL to walk the talk on interest rates

Former Governor Cabraal asks CBSL to walk the talk on interest rates


By: Staff Writer

Colombo (LNW): Former Governor Ajith Nivard Cabraal yesterday urged the Central Bank of Sri Lanka (CBSL) to follow its own advice on lowering interest rates.

Cabraal, joining the television news program, said it is ironic that the CBSL is requesting commercial banks to reduce interest rates when they themselves are paying higher interest rates every week.

“Just yesterday or two or three days ago, the Treasury bill rate went up to over 19%. When the Government and the CBSL on behalf the Government is paying 19% they are asking the banks to reduce their lending rates.

If you want the banks to reduce the rates then you also must ensure that the reduction is taking place from the Government side,” he said.

Cabraal said people do not merely heed to statements of the CBSL but also observe its actions. “If every week the Central Bank is increasing the interest rates, the banks will question as to what is going on and wonder how they can compete with gaining advances and deposits if the CBSL is paying 19% plus for deposits,” he noted.

“We have also got to see that there is a reflection of the ground situation on these rates. We can say goodbye to growth with these interest rates,” he added.

The former governor noted that economic growth has been negative every quarter since the increase of interest rates. “We must revamp these interest rates if we are to witness growth once more,” he opined.

Sri Lanka kept its key interest rates unchanged in a surprise move on Thursday as it chose to wait for the impact of its rate cuts over the previous two months filter through the crisis-hit economy.

It also announced administrative measures to bring down lending rates in certain categories that it said remained high.

The Central Bank of Sri Lanka (CBSL) kept its standing deposit rate and standing lending rate unchanged at 11% and 12% respectively. CBSL had cut rates by a total 450 basis points over June and July.

The bank said it would take targeted administrative measures to reduce specific lending rates it considered excessive and direct banks to reduce overall rupee lending interest rates by an appropriate margin in the period ahead.

CBSL had previously raised rates by a record 1050 basis points till March to contain inflation and cool the teetering economy.

Sri Lanka’s economy crumpled last year after its foreign exchange reserves dropped to record lows, leaving the country struggling to pay for essential imports, decimated the currency, and sent inflation soaring.

Sri Lanka’s key inflation index peaked at 70% year-on-year in September but came down to 6.3% in July after the island nation locked down a $2.9 billion bailout from the International Monetary Fund (IMF).


Leave a Comment

To prove you're a person (not a spam script), type the security word shown in the picture.
You can enter the Tamil word or English word but not both
Anti-Spam Image