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Sri Lanka slashes key interest rates to aid virus-hit economy

09 July 2020, MVT 17:32
People walk past the main entrance of the Sri Lanka's Central Bank in Colombo, Sri Lanka March 24, 2017. REUTERS/Dinuka Liyanawatte/Files
09 July 2020, MVT 17:32

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.

The government imposed a nationwide coronavirus lockdown on March 20 which lasted until last month., adding to the economic woes.

Sri Lanka's economic growth slowed to 2.3 percent last year compared to 3.3 percent in 2018.

The International Monetary Fund in April predicted growth of 3.5 percent this year, but many private-sector analysts fear it will be closer to zero because tourist arrivals are at a standstill.

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.

Colombo, Sri Lanka | AFP

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