The impact of the COVID-19 pandemic may result in severe stress on economic and financial system stability in the period ahead unless immediate remedial actions are taken, stated the Central Bank of Sri Lanka (CBSL).

Issuing a statement, the CBSL said that the growth of the Sri Lankan economy has fallen to dismal levels over the past few years.

In this context, in support of the government’s efforts to revive the economy, the Monetary Board of the CBSL, at a meeting held yesterday (16), has decided to introduce new credit schemes under Section 83 of the Monetary Law Act No. 58 of 1949.

Accordingly, in addition to the already disbursed Rs 27.5 billion under the refinance scheme introduced on 27 March 2020, the Central Bank will provide funding to Licensed Commercial Banks (LCBs) at the concessionary rate of 1.00 percent against the pledge of a broad spectrum of collateral, on the condition that LCBs, in turn, will on-lend to domestic businesses at 4.00 percent, while ensuring the greatest possible distribution of this facility. 

This scheme along with the existing refinance Scheme will provide Rs 150 billion in total to the businesses affected by the COVID-19 pandemic. 

In addition, the construction sector enterprises will be provided with a facility to borrow from LCBs, using guarantees issued by the government equivalent to the amount due on account of contracts carried out in the past, under a new dedicated credit scheme funded by the Central Bank and made available at the aforementioned concessionary rates.

Operating instructions on these new credit schemes will be issued in immediate due course, stated CBSL.