Experts expressed concerns over undue pressure imposed on the banking system and fiscal policies implemented in a hurried manner saying these moves could make a grave impact on the country’s otherwise healthy banking system.
Former State Minister of Finance Eran Wickramaratne, who is on the national list of the Samagi Jana Balawegaya (SJB) headed by Sajith Premadasa, said the President and all politicians should keep away from putting undue pressure on the financial system.
His comments follow the reproach received by the Central Bank (CB) top officials by President Gotabaya Rajapaksa that the CB officials have failed to support the government in its economic policies.
In response, Mr. Wickramaratne said the President’s remarks have shaken the CB in a situation where the monetary policy should be independent from the government.
“The policy changes made by the CB in the wake of the President’s rebuke have been made out of fear instead of following sound economic policies,” he charged.
The reduction of interest rates could work in both ways as it would have an adverse impact on senior citizens, he said.
Commenting on the reduction of taxes by the new government soon after coming into power, Mr. Wickramaratne said it was an ill-advised move.
“There was no proper basis behind the reduction of the taxes. This resulted in the government losing a colossal amount of revenue. Now we don’t even have proper revenue figures published by either the CB or the Finance Ministry, this is a grave concern,” he said.
Meanwhile, SJB Colombo District candidate Harsha De Silva said the government had obtained foreign loans worth over Rs.1,000 billion during the first four months.
Against this backdrop, CB Governor Professor W.D. Lakshman announced that the Monetary Board had unanimously decided to reduce rates by 100 basis points and urged licensed commercial banks to reduce their rates accordingly.
So far, 250 basis points have been reduced by the CB during this year. With the latest reduction, Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank was reduced by 100 basis points each to 4.50% and 5.50% respectively.
Meanwhile, the ruling Sri Lanka Podujana Peramuna (SLPP) lamented and complained that commercial banks have failed to stand by the investors, entrepreneurs and the members of the business community though the CB has announced concessions.
SLPP strategist Basil Rajapaksa said they were not satisfied with the way the banks were providing relief to the customers, especially during the COVID-19 outbreak.
“The banks could have done more to assist the people. They could have at least slashed the interest rates of one month. The banks are not gravely impacted by the COVID-19 crisis as much as the other people,” he said.