Last week, the Central Bank of Sri Lanka reaffirmed its stance against regulating interest rates, opting to let market forces dictate the rates. Central Bank Governor Dr. Nandalal Weerasinghe emphasized that the bank has no intention of intervening in interest rate setting, despite ongoing delays in how quickly banks pass on monetary policy benefits to borrowers and the broader economy.
“We have no intention of regulating (interest rates),” stated Weerasinghe during a recent media briefing. His comments came in response to queries about the Cabinet’s decision to provide relief for borrowers who have taken gold-backed loans. The Cabinet, under a proposal by President Ranil Wickremesinghe, approved an interest subsidy of up to 10 percent for such loans taken on or before June 30, 2024, with a maximum amount of Rs.100,000.
Weerasinghe pointed out that funding such relief programs would require taxpayers’ money and stated that it is up to the government and the Finance Ministry to determine how to fund these subsidies. He also reiterated this concern when discussing a proposal for a development bank aimed at improving small business access to finance, highlighting the use of taxpayer funds to cover loan defaults.
The Governor’s focus on “taxpayers’ money” underscores his skepticism towards proposals involving government support, arguing that these measures would place a financial burden on taxpayers. He frequently cites this perspective when addressing government initiatives designed to support marginalized or economically affected segments of society.