After Sri Lankan president Gotabaya Rajapaksa demanded action within 24 hours from the Central Bank, new credit schemes and a reduction of the Statutory Reserve Ratio (SRR) have been announced in an attempt to halt Sri Lanka’s worsening economic crisis. 

“In addition to the already disbursed Rs. 27.5 billion under the refinance scheme introduced on 27 March 2020, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1.00 per cent against the pledge of a broad spectrum of collateral, on the condition that LCBs in turn will on-lend to domestic businesses at 4.00 per cent, while ensuring the greatest possible distribution of this facility,” announced the Central Bank. “This scheme along with the existing refinance Scheme will provide Rs. 150 billion in total to the businesses affected by the COVID-19 pandemic.”

The Monetary Board of the Central Bank also announced that it will further reduce the Statutory Reserve Ratio (SRR) which it claims “injects around Rs. 115 billion of additional liquidity to the domestic money market, enabling the financial system to expedite credit flows to the economy”. 

“Growth of the Sri Lankan economy has fallen to dismal levels over the past few years, and the impact of the COVID-19 pandemic may result in severe stress on economic and financial system stability in the period ahead unless immediate remedial actions are taken,” the Central Bank admitted.

The moves come after Rajapaksa lashed out at the bank stating it had “not extended its support” and demanded they “explain reasons for their failure”.