How interest rates can be reduced | Sunday Observer
Politicians express their opinions:

How interest rates can be reduced

19 February, 2023

SJB National Organiser MP Tissa Attanayake-If SJB comes to power, interest rates will definitely be reduced:

Democratic Left Front Leader MP Vasudeva Nanayakkara- Is raising interest rates the answer to inflation?:

Former JVP MP Sunil Handunetti- Govt. using bank deposit funds:

TNA MP Shanakyan Rasamanikkam - This is the result of huge tax concessions:

The economic crisis led to an increase in loan interest rates offered by commercial banks in Sri Lanka. Politicians representing various parties have expressed varying views on this. This week the Sunday Observer presented them with the following questions to elicit their opinions on the matter.

1. The interest rates that were once in the single-digit range have now increased to 30 percent. What is your party’s view of this?

2. Who decides if to increase or reduce these interest rates?

3. If your party was in power now what proposals would you have brought to the table to reduce these rates?

Samagi Jana Balawegaya National Organiser MP Tissa Attanayake

1. Keeping interest rates in the single-digit range increases investment and supports the country to maintain its standard of living. Every country attempts to keep it in this range to maintain its development goals. The people cannot bear the current rate which leads to a decrease in investments. This in turn negatively affects production, employment and revenue. An economic policy must be formulated to bring it to a single digit. But now all this has gone beyond control. It must be controlled through long and short-term plans.

2. It is done by the CBSL based on the supply and demand in the financial markets. It determines the financial condition of a country and the bank interest rate on behalf of the Government. But the Government cannot feign ignorance as the CBSL is a Government body.

3. The situation cannot be controlled by circulars and other methods. If the past methods are once again used by the CBSL to maintain the dollar value, the situation would implode. Only a proper economic management plan can resolve this issue. The SJB can change this if we come into power. In order to systematically bring down the bank interest rate, it should be done by looking at the demand and supply and increasing production by paying more attention to foreign sources of income.

The local manufacturing sector should be encouraged. Corruption and waste must be controlled while worker remittances must also increase. The SJB has presented a series of proposals on this.

Democratic Left Front Leader MP Vasudeva Nanayakkara

1. The increase in interest rates in this manner is wrong. SMEs are suffering and businesses have collapsed. They claim this was necessary due to inflation but the inflation is also a result of undue profit and tax hikes leading to a rise in the cost of living. If goods are distributed according to fair prices there will be no inflation. Now no one is willing to invest. The economy will also suffer in turn.

2. It is decided by the CBSL and they give various reasons to justify it. The Government is working according to an incorrect formula. In the end, a major death blow will be delivered to the economy. But the Government can intervene to reduce the rates. But this is not happening through the current Government. The CBSL is working according to the policies of the current Government.

3. We would not allow the interest rate to be maintained at the current levels. We will work towards reducing it and provide the advice to the CBSL then. It is difficult to say at what level it should be maintained but we will definitely reduce it to ensure the development of the country.

Janatha Vimukthi Peramuna former MP Sunil Handunetti

1. Banks provide loans for businesses as well as the public and not to the Government. Today funds available to provide loans to these parties are being given to the Government to pay salaries. The Government is depleting the deposit money which would lead to the collapse of the banking system. The Government has a responsibility to safeguard the financial system but it is more focused on how to maintain itself than the economy.

2. It is the role of the Central Bank and not the role of the Government. A Government cannot control the financial market. It is the responsibility of the Government to strengthen it instead.

3. Money must be pumped into the economy and expenditure must be cut down. Corruption must be stopped. Production must be increased too. People have already tightened their belts. Benefits given to Ministers must be cut down. Our Government will see to this. The Government must make more sacrifices than the people. Politicians have caused State enterprises to suffer losses through corruption and political interference. We will put an end to all this.

State-owned banks have lent the most irrecoverable loans to political cronies without any collateral.

Loans given in 1991 are still being repaid. Today the interest to be recovered is more than the loan amount.

Tamil National Alliance MP Shanakyan Rasamanikkam

1. Bank interest rates are only one indicator of a country’s economy. If it was not increased along with the inflation it would have led to disaster. The main reason for the increase in interest rates in Sri Lanka is the poor economic policies since 1948. This disaster started due to the 52-day political crisis in October 2018. 2019 came and aggravated this situation.

Tax concessions and the elimination of income tax also led to this situation. Not only Gotabaya Rajapaksa, all leaders who ruled the country since 1948 contributed to the collapse of the economy

2. This interest rate happened due to proposals from the CBSL, Ministry of Finance, experts and the IMF. But tough situations call for tough answers. The CBSL Governor and other staff must be allowed to take decisions freely. Politicians including the President should not interfere in these matters.

3. It will take more time to reduce the interest rates. But the only solution to rectify the situation is to bring in investments. With IMF support, we will be able to obtain more foreign debt. But we must develop investments and take steps to reduce inflation. The rupee must be strengthened by bringing in foreign investments. If billions of investments are brought to Sri Lanka, it will be possible to reduce the interest rate and inflation. According to my economic knowledge, there is no other way to reduce this interest rate.