2 weeks Ago By Thilina Walpola
Dr. Nandalal Weerasinghe, Governor of the Central Bank of Sri Lanka, assured on Wednesday that a systemic economic “trickle-down” effect would create new employment opportunities, generate greater economic dividends, and provide better government services to the people, among other benefits. The Governor’s remarks came in response to a question posed by The Island Financial Review : The Island: “Governor, Sri Lankan banks have reported robust profits and strong balance sheets, yet ordinary citizens remain trapped in a daily struggle for survival.
At a recent business forum, a prominent banker argued that the ‘trickle-down effect’ would eventually alleviate public hardship. Do you agree with this theory, and if so, when will Sri Lankans actually feel relief in their lives?” Governor: “The banking sector’s return on equity aligns with sustainable business practices. The banking industry, like tourism, manufacturing, or any other sector, must generate reasonable profits to survive and expand.
This profitability is not unique to banks; it is a prerequisite for broader economic recovery. During the crisis, many sectors collapsed, but banks could not afford losses, as public trust hinges on their stability. Had banks failed, depositors would have panicked, triggering a bank run.
We instructed banks to prioritise stability while accepting modest profits during the worst of the crisis. Their current profits remain disproportionate compared to other sectors. As the economy strengthens, recovery will generate jobs, dividends, and services, enabling the trickle-down effect to reach all citizens.
” The Governor made these remarks during the Q&A session following the second Monetary Policy Review for the period up to March 2025. When asked whether the Central Bank was intervening to safeguard the rupee, the Governor replied, “We have been purchasing US dollars—we buy dollars from the market.” On foreign exchange supply and demand, he stated, “It fluctuates daily for various reasons.
In February and March 2024, we observed foreign inflows into government securities. Meanwhile, exporters and the remittance sector are performing well. Import demand remains stable at healthy levels.
Thus, there is a ‘nice balance’ between foreign exchange inflows and outflow.” According to the Review, rupee liquidity remains in surplus, and market interest rates continue to decline in line with the eased monetary policy. Credit flows to the private sector remain robust, supported by low interest rates.
The Central Bank expects this trend to continue, bolstering domestic economic activity. The Governor also noted that car import orders received thus far total approximately USD 200 million. Authorities had initially projected USD 1 billion would be required to meet the car import demand after an import ban that lasted nearly 5 years and that would help accrue significant amount of taxes to the Treasury.
By Sanath Nanayakkare.
