Sri Lanka has cut the statutory reserve ratio (SRR) reducing the share of deposits that banks have keep in the central bank to 2.0 percent from 4.0 percent, releasing 115 billion rupees into the credit system.
The liquidity injection came hours after President Gotabaya Rajapaksa summoned Governor W D Lakshman and top officials to his office to issue them a harsh warning for not expanding a re-finance facility by 100 billion rupees to 150 billion rupees.
This action sparked heavy criticism of economic experts who claimed it as going haywire to support a sustained revival of economic activity on the verge of collapsing.
Economic experts have questioned the central bank’s move to reduce the statutory reserve ratio (SRR) rates to boost the country’s economy while printing Rs 242.57 billion rupees in 2020.
They noted that the monetary authority has misread the issue as the lack of liquidity, as it introduced a refinance facility of Rs 150 billion.
“They have kept excess liquidity elevated from Rs 36 billion from end December to Rs 80 billion in June and prints Rs 243 billion additional money. Misreading the issue?”, another economist questioned .
(LIN)