The Central Bank has said that the interest rates can be relaxed once again with a cash infusion via the Extended Fund Facility (EFF) from International Monetary Fund (IMF).
The Central Bank officials told this at the Committee on Public Finance (COPF) which met at the Parliament Complex chaired by Committee on Public Finance Chairman Dr. Harsha De Silva yesterday, the Communications Department of Parliament said.
Commenting on the adverse effects of market contraction due to the stifling interest rates, the Central Bank said that those measures have been taken to limit growth in order to prevent the need for greater foreign exchange given the dwindling amount currently in the country.
They have reiterated that with a cash infusion via the Extended Fund Facility (EFF) from IMF, interest rates can once again be relaxed, and the market will once again have an opportunity to expand.
When the question of alternatives to an IMF bailout were reached, the CB stressed that no other international financing/funding institute is willing to partner with Sri Lanka on its debt management unless they see an IMF partnership materialize first. With the ostensible debt treatment measures that an IMF program accompanies, it reassures international agencies of Sri Lanka’s credibility to once more partner with the country for future ventures including debt management. This is why the CB stresses that it is imperative for Sri Lanka to lock in the bailout.
The Chairman of the Committee reiterated the Committee’s commitment to providing bipartisan support to the reforms put forward by the International Monetary Fund (IMF).
Dr. De Silva stressed that the aim of the committee regardless of allegiances will be to stand by the reforms promulgated by the IMF and being executed by the Central Bank (CB). This comes in the wake of a Central Bank confirmation that they are confident of having an actual IMF first tranche disbursement within the 1st Quarter of 2023.
CoPF queried the severe social implications of such steep mechanisms to adhere to IMF conditions. The CB responded by confirming that the IMF are wary about the social impact to vulnerable communities and has invoked certain safeguards such as expenditure ceilings to negate those effects.