Discussions with the IMF will continue and hopefully an agreement on a support package will be reached in about three months, as there is some improvement with regard to political stability in the country, the governor said. Central Bank, Dr. Nandalal Weerasinghe, to reporters on the direction of monetary policy. Thursday press briefing.
Responding to former finance minister Ali Sabry’s statement that reaching some form of agreement with the global lender would take at least six months, the governor said the former minister’s statement had been misunderstood and added that following preliminary discussions and subsequent IMF board approval, an agreement could be reached within about three months.
It’s not a one-sided affair. Both parties must agree, the governor said.
Asked about his position on whether to stay or leave his post, the governor said there was a marked improvement in terms of political stability today compared to a state where there was no Prime Minister, cabinet but rather violent more than a week ago when I said I would step down if the stalemate persists for a few weeks.
The financial sector regulator hopes to see a gradual reduction in the circulation of foreign currency outside the formal banking system following moves to reduce the holding of foreign currency from $15,000 to $10,000 and the holding period to two. weeks, after which they must be deposited in a foreign exchange account under the Foreign Exchange Act.
Foreign currencies had been held back due to the large black market bounties offered outside the formal channel.
“We requested that all foreign currency holdings be reduced to $10,000 with proof of how they were acquired and a two week grace period to bring them to the banking system. Fines will be imposed for non-compliance,” the governor said.
However, according to the Central Bank, the economy is expected to contract sharply this year due to persistent supply shortages, energy-related issues and social tensions, as evidenced by several leading indicators.
The Central Bank’s demand management policies and planned fiscal consolidation measures are also expected to keep aggregate demand subdued over the course of the year.
In addition, the country has accumulated nearly 51 billion dollars in foreign debt, of which 7 billion must be settled this year.
Global economic growth is also expected to moderate in response to monetary policy tightening by central banks globally to counter inflationary pressures as well as the ripple effects of geopolitical tensions in Eastern Europe.
The bank said that the policy measures implemented by the Central Bank must be reinforced with adequate and timely policy adjustments by the government to prevent further deterioration of economic conditions and complement the efforts of the Central Bank implemented so far. Now, urgent measures are needed to restore greater political stability through consensual governance and social harmony.
Prompt policy measures are needed to strengthen fiscal performance that would help avoid overreliance on monetary financing and maintain medium-term fiscal sustainability. Rapid and transparent review of tariffs in the energy sector remains a priority to strengthen the financial situation of energy-related public enterprises, while improving the effectiveness of social protection programs to support vulnerable groups in society. affected by unprecedented economic conditions.
The Central Bank has decided to maintain the Central Bank’s Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) at current levels of 13.50% and 14.50%.