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

COLOMBO, Sri Lanka (UPDATED) – Sri Lanka’s central bank on Thursday, July 9, cut interest rates for the 5th 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%. The deposit rate was cut by the same amount to 4.5%.

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% last year compared to 3.3% in 2018.

The International Monetary Fund in April predicted the economy would contract by 0.5% in 2020.

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 stabilize the local currency which hit record lows in April prompting the government to ask public employees to donate their May salary to the state. – Rappler.com