Home » How the Economy of Sri Lanka down turned? Economic experts.

How the Economy of Sri Lanka down turned? Economic experts.


Sri Lanka’s economy has been turned upside down by so called tools introduced by the Central Bank following the introduction of their toolsin 2020 in response to verbal attack levelled at CB top officials including former Governor W D Lakshman and Senior Deputy Governor Nandalal Weerasinghe by then President Gotabaya Rajapaksa on June 16 2020.

Sri Lanka’s Former President Gotabaya Rajapaksa has slammed central bank over not issuing 150 billion rupees of new money for banks to give loans to businesses hit by Coronavirus.

“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,” he had told central bank officials who were summoned to a meeting at the Presidential secretariat at that time..

“The Central Bank and the Treasury are entrusted with the responsibility of formulating the right monetary and fiscal policies that are instrumental in economic revival.”

He lambasted officials saying “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.”

“Foreign countries 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? He asked ,

Burning mid night oil, CB officials hurridly submitted a report with recommendations to the the then President who gave his consent to implement it.

That is how the country’s economy began its down turn from bad toworse several eminet experts pointed out. Adding that the people should be reminded about these facts.

Accordingly the Central Bank of Sri Lanka also deployed an array of monetary policy tools in 2020, while being one of the first central banks in the world to ease monetary policy citing the outbreak of COVID-19.

These policies, including unconventional measures, were executed at an extraordinary pace, size, and scope, aimed at injecting sufficient liquidity into the market and lowering borrowing costs, thus supporting financial markets and the recovery.

the Central Bank reduced its policy interest rates substantially by 2.50 percentage points during 2020, with a view to enhancing credit flows by lowering real interest rates, which in turn would support domestic investment, production and consumption in the economy.

Further, the Central Bank lowered the Bank Rate by 6.50 percentage points during the year to signal the availability of emergency funding for the financial sector at an affordable cost.

It lowered the Statutory Reserve Ratio (SRR) by a total of 3 percentage points, thereby directly injecting liquidity of around Rs. 180 billion to the market immediately, in 2020.

Open Market Operations (OMO) conducted by the Central Bank guided short term interest rates to remain at low levels while maintaining sufficient liquidity in the money market.

Further, the Central Bank provided urgent financial assistance to the Government, in order to support businesses and individuals affected by the pandemic, by purchasing Treasury bills from the primary market, totaling around Rs. 625 billion, on a net basis, during the year.

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