The Central Bank Governor of Sri Lanka addressed several key issues related to the nation’s economic recovery and monetary policy. He expressed frustration with the slow pace of banks in assisting struggling businesses. He emphasized the need for banks to establish “business recovery units” and “special corporate work out” schemes to aid companies with large debts in regaining their footing.
The Governor also defended his decision against suspending parate execution, a legal mechanism for debt recovery. While acknowledging the relatively small amount involved (around 1% of bank loans), he argued that suspending it could negatively impact lending practices.
Regarding monetary policy, the Governor highlighted the success of recent measures in lowering market interest rates. He stressed the importance of financial institutions passing on these benefits to businesses and households to further stimulate economic activity.
On the economic front, the Governor offered positive news. He reported that the economy contracted by a smaller-than-expected 2.3% in 2023, a significant improvement over the 7.3% contraction in 2022. This improvement is attributed, in part, to a 4.5% growth in the fourth quarter of 2023. The Governor also pointed to a rise in tourism earnings and foreign remittances, which have bolstered foreign reserves. He expressed confidence that these factors, along with other anticipated foreign income, will keep the US dollar exchange rate below 300 rupees in the coming months.