Sri Lanka Slashes Key Interest Rates To Aid Virus-Hit Economy
Sri Lanka’s central bank on Thursday cut interest rates for the fifth time this year in a new bid to breathe life into the coronavirus-stricken economy.
The Central Bank of Sri Lanka monetary board reduced its lending rate by 100 basis points to 5.5 percent. The deposit rate was cut by the same amount to 4.5 percent.
A bank statement said the board wanted to “aggressively enhance lending to productive sectors of the economy, which would reinforce support to COVID-19 hit businesses as well as to the broader economy”.
Sri Lanka’s economy has been slumbering since last year’s Easter Sunday suicide bombings by militant Islamists which badly hit tourism.
Sri Lanka’s economic growth slowed to 2.3 percent last year compared to 3.3 percent in 2018.
The government imposed a nationwide coronavirus lockdown on March 20 which lasted until last month and that has extended the damage to the tourism industry.
The International Monetary Fund in April predicted the economy would contract by 0.5 percent in 2020.
Faced with a serious foreign exchange crisis, the country has slapped an indefinite ban on non-essential imports, including vehicles.
The bank said this had helped stabilise the local currency which hit record lows in April prompting the government to ask public employees to donate their May salary to the state.