CB Governor finally admits the obvious

By Sanath Nanayakkare

Governor of the Central Bank Prof. W. D. Lakshman yesterday acknowledged the fact that fixed income earners, particularly senior citizens dependent on retirement pensions had been dversely affected by the prevailing low deposit interest rates.

Prof. Lakshman said so in a virtual address while announcing the Central Bank’s key strategy document ‘Roadmap for 2021 and beyond’.

“The prevailing low interest rate regime has highlighted the need for improvements in the capital markets of the country to introduce an alternative, novel, safe, and attractive financial products, particularly for savers who face low deposit rates,” the Governor said.

“The sustainable solution to this problem lies in long-term income growth and institutional developments involving mutual funds, insurance and annuity schemes, pension, and superannuation schemes. The Central Bank will continue to work with the financial sector to develop such financial products which will support such vulnerable segments in the society,” he said.

“The Government has also proposed to introduce a contributory pension scheme to assist those in public enterprises, as well as the private sector. As the Budget 2021 proposed, other social safety net schemes will be developed to support the economically vulnerable groups in a low inflation, low-interest rate environment’, he said.

“The performance of the fiscal sector during 2020 was significantly affected by the decline in government revenue amidst the economic fallout. The resultant budget deficit was financed entirely through low-cost domestic sources, which alleviated fiscal pressures to a great extent,” the governor said.