by Shiran Illanperuma
COLOMBO, July 1 (Xinhua) -- Early fiscal and monetary policy interventions have ensured that Sri Lanka's economy "repositions itself to generate value" in the post-COVID-19 new normal, a report by the Central Bank of Sri Lanka (CBSL) has said.
Despite a curfew imposed to contain COVID-19 on March 20, which was fully lifted on June 28, Sri Lanka's economy "did not come to a complete standstill" due to continued provision of essential services, imposition of work from home measures, automation of the Colombo Tea Auction and the re-opening of FTZs by April, the CBSL said in its mid-year fiscal position report published on June 30.
Highlighting that over 95 percent of Sri Lanka's factories have re-opened, the report said that the "apparel industry which employs about 350,000 directly and 400,000 indirectly has been able to re-engineer their business models to produce protective gear and allied garments to meet the growing demand for such equipment," the report said.
"While the lockdown has affected the country's April 2020 exports to be only around 295 million U.S. dollars, it has improved to almost 695 million U.S. dollars by May 2020, a significant improvement over the previous month," it added.
The report further noted that early fiscal policies enacted by the government in order to cushion the impact of stresses caused by the global COVID-19 pandemic were key to ensuring such a recovery. Such policies include the establishment of a COVID-19 Healthcare and Social Security Fund, and a Fuel Price Stabilization Fund.
Tax exemptions were granted for the import of essential medical supplies and equipment and to the provision of such goods to frontline anti-epidemic institutions such as the Ministry of Health and Indigenous Medical Services, the Department of Health Services, Tri Forces and the Sri Lanka Police.
In order to provide financial assistance to the public during the curfew, the government provided a one-off Rs. 5,000 (26.9 U.S. dollars) cash allowance to vulnerable groups including senior citizens, people with disabilities, farmers and daily wage workers in the months of April and May. Beneficiaries of Samurdhi, a government social security program, were provided with an interest free advance of Rs. 10,000 (53.8 U.S. dollars).
Meanwhile, all residents were entitled to a one month grace period on the payment of utility and credit card bills. Lease loan payments were suspended for 1.5 million self-employed people.
In the monetary sector, the government reduced the Statutory Reserve Ratio (SRR) to 2.00, thereby injecting around Rs. 150 billion (807.4 million U.S. dollars) into the banking system in order to lubricate economic activity. The Standing Deposit Facility Rate (SDFR) and Standard Lending Facility Rate (SLFR) were also reduced by 150 basis points to reduce market lending rates from January to May.
A Rs. 50 billion (269 million U.S. dollar) re-financing facility was introduced to support local businesses. In addition, three new low-interest credit schemes have been introduced by the government to assist COVID-19 affected sectors such as construction.
Touching on the global economic situation, the report specifically highlighted that "China has already lifted its strict social distancing rules implemented in Wuhan and elsewhere in China and much of the economic activities have been recommenced."
"It is expected that with the Chinese economy slowly returning to normalcy and with the easing of social distancing measures in major economies in the second half of the year, the global economy would start to show signs of bouncing back at the end of the year," the report said.
Sri Lanka currently has 2,050 confirmed cases of COVID-19, with all new cases since April 30 being detected from overseas arrivals held in quarantine centers. A total of 1,748 patients have fully recovered from the virus while 11 patients have died. Enditem