Sri Lanka can overcome economic crisis if Central Bank allowed to run independently: Guv

Nandalal Weerasinghe, the recently appointed Governor of the Central Bank of Sri Lanka, expressed confidence in the country's ability to overcome the unprecedented economic crisis, saying that one method to do so is to allow the central bank to operate independently.

The new governor of Sri Lanka's Central Bank voiced confidence in his ability to manage the country's economic situation during his first media briefing after taking office on Friday evening. Weerasinghe said that President Gotabaya Rajapaksa had given him the power to run the bank independently and also asked him to expedite actions to get the country out of the crisis.

“We want to give a firm signal. We are serious about what we are doing and wanted independence in what we are doing. And as a result, we took the necessary and sufficient actions today immediately to address the situation. With this situation I would expect some stability in the market confidence and the positive reaction from the market from Monday when markets open,” Weerasinghe was quoted as saying by Colombo Page new agency.

Weerasinghe stated he met with the bankers and told them he would deal with them in a transparent manner.“We will be open, transparent and truthful, and also we need their full support," he stated. He further said, “Things are challenging and we need to take decisive action. Things will get worse before they get better, but we need to apply the brakes to this vehicle before it crashes.” Meanwhile, Weerasinghe announced that he will have a virtual meeting with the IMF on April 11 and that a Letter of Intent to the IMF will be presented later, after the technical procedure completion.

Sri Lanka central bank hiked interest rates 

As the economic crisis in the country deepens, notably Sri Lanka's central bank raised interest rates by a record 700 basis points on Friday. After its currency fell almost 35 per cent against the US dollar in a month, the Central Bank of Sri Lanka upped its benchmark lending rate to 14.5 per cent to "stabilise the currency rate." Nandalal Weerasinghe, the bank's newly appointed governor, claimed attempts in the previous year to regulate foreign exchange markets and maintain interest rates artificially low led to the unprecedented economic instability.

"We are now in damage control mode. We would not have had to make such a sharp increase if rates had been raised incrementally over a period of time," Weerasinghe said at his first press conference. He also assured that he would relax exchange controls introduced by his predecessor.

Sri Lanka Crisis

The Gotabaya Rajapaksa-led government is battling to meet basic requirements for its 22 million citizens amid an unprecedented economic crisis in the country caused by mishandling of finances and ill-timed tax cuts. The crisis was exacerbated further after cabinet ministers resigned on Sunday, April 3, with immediate effect. Sri Lanka is currently facing a foreign exchange deficit, which has resulted in food, fuel, power, and gas shortages, and has sought economic assistance from friendly countries, ANI reported. 

Several people on Thursday protested outside the office of Sri Lankan Prime Minister Mahinda Rajapaksa. Protestors chanted anti-government slogans against the Gotabaya Rajapaksa-led government for mishandling the ongoing crisis in the island nation. Wide-scale protests at several places started following a notification revoking the proclamation issued declaring the State of Emergency by Sri Lankan President Gotabaya Rajapaksa. Protestors across the country held signs reading "Gota go home," calling on Rajapaksa and his administration to resign in the wake of the country's greatest economic crisis since its 1948 independence.