Sri Lanka will notch around five percent economic growth rate this year much above the speculated low growth rate due to the global pandemic, said Central Bank (CB) Governor Prof. W.D. Lakshman.
He said the GDP growth rate may not be as forecast initially but would be better than the low growth rate predicted by some.
“We will do much better than last year, going beyond a negative growth to a positive rate of around five percent this year,” the Governor said.The economic growth plummeted to minus 3.6 percent last year due to the adverse effects of the global pandemic that wreaked havoc across the globe bringing trade, investments and business to a grinding halt.
The Central Bank forecast a six percent GDP growth rate this year in its 2020 annual report.
“Economic performance this year would not be as bad as expected since the mode of travel restrictions is different under the third wave and also the country has learnt to cope up with the crisis,” the governor said. However, think tanks and economists are of the view notching a high growth rate would be a daunting task given the stifling effects of the killer disease that has spread its tentacles to all spheres of life.
“It is too early and too ambitious to predict a higher growth rate at this point of time when most economic activities are not at full operations while most industries have reached a point of no return,” an economist said.
The regulator decided to consider granting certain concessions to Covid-affected borrowers to ease the burden and help revive the economy. With the outbreak of the third wave of COVID-19 in Sri Lanka, requests from many concerned parties and Government Authorities were received by the Central Bank of Sri Lanka (CBSL) to consider granting certain concessions to the affected borrowers/ customers. CBSL has requested licensed commercial banks and licensed specialised banks , to extend the following concessions to affected businesses and individuals to meeting the challenges faced by businesses and individuals due to the third wave. Licensed banks may offer additional concessions to businesses and individuals affected due to the third wave on their request, in a way that the overall benefits to the borrower/customer are not less than the benefits offered under this Circular.
1. Deferment or restructuring of existing credit facilities in the performing category as at May 15, 2021
(a) Licensed banks shall defer recovery of capital, interest, or both of the existing credit facilities of borrowers who are affected by the third wave of COVID-19, on case-by-case basis, during the period up to 31 August 2021, considering the financial difficulties faced by the eligible borrowers, such as loss of job, loss or reduction of income/salaries or sales, and closure of business.
(b) The deferment of capital, interest or both shall be granted for one or more of the existing credit facilities granted in Rupees or in foreign currencies, considering the financial difficulties and repayment capacity of the eligible borrowers.
(c) In the case of any Rupee facilities considered for the above deferment, licensed banks may charge an interest rate not exceeding the 364-days Treasury Bills auction rate as at 19 May 2021 plus 1 per cent per annum (i.e., 5.18% + 1% = 6.18% p.a.), for the deferred period and only on the amount deferred amount. In the case of foreign currency loans, licensed banks may charge a concessionary interest rate considering the prevailing low interest rates
(d) Alternatively, licensed banks may restructure the existing credit facilities over a longer period, considering the repayment capacity of the borrower and an acceptable revival plan.
In this case, the licensed bank and the borrower shall agree on an interest rate, considering the prevailing low interest rates.
(e) Licensed banks shall extend the due dates of revolving credit facilities, including but not limited to facilities such as working capital, pawning, temporary overdrafts, and short-term trade finance facilities, during the period up to August 31, 2021, provided such due dates fall during May 15, 2021 to August 31, 2021.
Licensed banks may charge interest for the deferred period and only on the deferred amount as stated in I (c) above.
(f) Penal interest shall not be accrued or charged during the concessionary period, i.e., May 15, 2021 to August 31, 2021.
(g) Licensed banks shall accommodate any request from affected borrowers to delay the due dates of loan repayment by a few days (maximum 10 working days) due to the ongoing travel restrictions, without deferring or re-structuring such facilities.
Licensed banks shall not charge any additional interest or other charges for such delay. (h) Borrowers who enjoy deferment of lease repayments under Circular No. 3 of 2021 issued on March 13, 2021 or moratorium under Circular No. 4 of 2021 issued on March 19,2021 are not eligible for concessions provided above.