The Central Bank was of the view that there was no need for a Rapid Financing Instrument from the International Monetary Fund. At the start of 2021, the rupee denominated government securities market has seen a marginal inflow.
CBSL Governor Prof. W D Lakshman said, “It is government policy to work as much as possible to resolve our foreign exchange problems on a self-reliant basis.”
Prof Lakshman was speaking at the Press Conference following the Monetary Policy announcement on January 19 held virtually. Sri Lanka has initiated discussions with multi-lateral institutions and countries that are willing to help on a ‘non-interventionist basis’.
The country is securing its Foreign Exchange requirements where possible in a manner that does not create additional debt.
Prof Lakshman said, “We are going to be relatively successful in the process. The negotiations that we are carrying with a few countries and a few agencies will come to a successful conclusion probably in the next couple of months.”
International Sovereign Bonds have had improved secondary market yields at the start of 2021. The Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank remain at their current levels of 4.50 per cent and 5.50 per cent, respectively. The recently formed Financial Consumer Relations Department receives on average 200-300 complaints a day. The department can solve 10-20 of those issues.
Swarnamahal Finance has been allowed to operate in the interest of depositors under a panel of management by the Central Bank to collect receipts from debts owed to the company.
The Employees Provident Fund has begun investing in the stock exchange with the recently approved investment guidelines by the Monetary Board. The EPF returned 9.25% in 2019, 9% in 2020, and is expected to have a positive real return in 2021. The Central Bank acknowledged the odd price differential between cheque and electronic fund transfers. Cheques are currently cheaper than electronic fund transfers.
As an initial step, the price differential has been reduced with the maximum price of the Common Electronic Fund Transfer Switch being reduced to Rs 30 from Rs 50 in 2021.
The Central Bank has through directive suspended bank recoveries against SME paddy millers. The monetary board will shortly introduce targeted lending for certain sectors of the economy. The capital market continues to see foreign outflows.
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