CBSL reduces both SDR and SLR rates in first monetary policy review for 2020

CBSL reduces both SDR and SLR rates in first monetary policy review for 2020

CBSL reduces both SDR and SLR rates in first monetary policy review for 2020

Written by Staff Writer

30 Jan, 2020 | 9:11 pm

COLOMBO (News 1st):- The Central Bank announced its first monetary policy review for 2020 this year, reduced key policy interest rates citing the need to support an economic recovery and forecasted a growth rate of 4% for 2020.

The Central Bank today (January 30) in its first monetary policy review for the year decided to reduce both the standing deposit and lending rates by 50 basis points to 6.5% and 7.5% respectively. According to the CBSL, the decision to reduce policy rates is intended to affirm the monetary board’s accommodative monetary policy stance, and further reduce the cost of funding for financial institutions to boost the growth. This is the third time in less than nine months that the CBSL reduced its rates.

The governor of the CBSL said, the recent acceleration of inflation to 6.2% in December 2019, was mainly caused by food inflation and not overheating of the economy. Deputy Governor of the Central Bank Dr Nandalal Weerasinghe said a group of representatives of the IMF is currently in Sri Lanka for discussions with the government and the Central Bank. During the event, Governor Professor Lakshman also said that the Central Bank expects economic growth of about 2.6% for 2019, and expects an economic growth exceeding 4% for 2020. However, this economic growth does not incorporate certain global developments such as the coronavirus.

The Governor of the Central Bank says that the growth has remained subdued and that there are many uncertainties in the global platform. He further says that with the spread of the coronavirus, which has already caused some disruptions to travel and tourism it has resulted in volatility in currency and markets. But the governor also says that it is too early to asses the impact of that.

He went onto say that a similar incident had happened in the past with SARS that was in China and Hong Kong and looking at the impact of that we’ve tried to access the situation. He adds that there will definitely be an impact, but that the numbers cannot be revealed quite now.

Journalists also questioned Central Bank officials about the forensic audits.

Q: What exactly will the 6th report of the forensic audit include?

Assistant Governor of the CBSL; 

“The 6th report is basically to audit selected entities regulated and supervised by the Central Bank. Under the new process, the cabinet appointed tender committee had published all the RFA’s and called the bids of the number of parties. The financial bid will be open tomorrow. After that, we have to do price negotiations and inform the relevant authorities. It is related to the court decision therefore, we must inform the court as well.”

Q: Governor, do you expect to take any action on the forensic audit report?

Governor of the CBSL;

“Its difficult to give a yes or no kind of an answer. The government is considering and there are certain areas where the Central Bank can take action. The judicial authority will take action. This is a complex issue and we have not taken a decision firmly.”

Q: They say there was negligence. Will you divest the Central Bank and EPF?

Deputy Governor of the CBSL; 

“We will not comment on the contents of the report at this point. One of the reports is to look at regulatory lapses. We are looking at those things and trying to correct those things and implement proper measures. The contents of the report is auditor’s report, not the Central Bank.”

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