Sri Lanka’s central bank governor said on Thursday he would remain at the helm of the bank given improved political stability amid an economic crisis, and would not step down as he l announced earlier.
Governor P. Nandalal Weerasinghe also said that the Central Bank of Sri Lanka had almost finalized the country’s debt restructuring plans and that proposals would soon be submitted to the cabinet, possibly by Friday.
Weerasinghe told reporters on May 11 that he would step down in two weeks in the absence of political stability, as any measures taken by the bank to deal with the economic crisis would not succeed amid political unrest.
Speaking to reporters after his bank announced it was keeping key lending and borrowing rates stable, Weerasinghe said there had been positive policy developments.
“Previously, there was no prime minister or cabinet. Comparatively, there has been a significant improvement,” he said.
“We now have new appointments. We have also found that our measures work well. I would like a Minister of Finance to be appointed. Now we are seeing an improvement so I think based on that I intend to continue,” he said.
Opposition MP Ranil Wickremesinghe was appointed prime minister last week and has made four cabinet appointments. However, he has yet to appoint a finance minister.
The nation of 22 million is grappling with a devastating economic crisis as President Gotabaya Rajapaksa’s tax cuts have emptied government coffers, COVID-19 has hit the important tourism industry and rising prices oil has emptied foreign exchange reserves.
The central bank held rates steady after a massive 7 percentage point hike at its previous meeting and reiterated the need for more fiscal measures and political stability in the crisis-hit economy.
Weerasinghe said the debt proposals were almost ready and could be sent to Cabinet by Friday for approval.
He also said inflation could reach 40% in the next two months, but was largely driven by supply-side pressures and bank and government measures were already curbing inflation. on the demand side.
Inflation hit 29.8% in April, with food prices rising 46.6% year-on-year.
U.S. investment bank JPMorgan backed crisis-hit Sri Lanka government bonds on Wednesday, saying recent policy changes should gradually improve its tensions and ease its talks with the International Monetary Fund.
Sri Lanka is now officially in default as a so-called grace period to make some already overdue bond interest payments expired on Wednesday.
“We are in preventive default. There may be technical definitions… For their part, they may consider this a defect. Our position is very clear, until there is debt restructuring, we cannot repay,” Weerasinghe told reporters.