COVID-19: Rajapaksa gives Central Bank 24-hour ultimatum to come up with economic recovery plan

Slamming the country's Central Bank for being in a "slumber", Sri Lankan President Gotabaya Rajapaksa on Tuesday said that it has failed to act during the COVID-19 pandemic and gave it a 24-hour ultimatum to come up with an action plan to revive the country's economy battered by the health crisis.

Slamming the country's Central Bank for being in a "slumber", Sri Lankan President Gotabaya Rajapaksa on Tuesday said that it has failed to act during the COVID-19 pandemic and gave it a 24-hour ultimatum to come up with an action plan to revive the country's economy battered by the health crisis. Addressing senior officials of the bank, he said the Central Bank had failed to present him with their intended tools which could be used to revive the economy.

The country is facing the worst financial crisis in its history due to the economic and travel curbs imposed after the coronavirus outbreak. "Give me your tools with which you hope to energise the economy, help banks, businesses," he said.

"You are in a slumber, just don't do anything," he said. The president gave the bank an ultimatum of 24 hours to come up with an immediate action plan to revive the economy which the World Bank had predicted could contract the country's economy up to 3 per cent in the post-COVID pandemic times.

"All of you are economists, what do you do? I have given my plan to you, If you can't work to that plan, give me your own plan by tomorrow morning," Rajapaksa said. "We should not allow the health crisis to be converted into an economic crisis," he said.

Rajapaksa said the Central Bank had failed to implement his request to release rupees 150 billion to commercial banks. "The businesses are not doing bad due to their mistakes," Rajapaksa said, adding that the government owed funds to businesses. "You can keep these monies as security and give them loans. They will then run the economy," he said. The World Bank had stated in its June 2020 report "Global Economic Prospects" that in Sri Lanka, the combination of falling tourism, manufacturing activity and services associated with the pandemic, is envisaged to cause the output to contract by 3.2 per cent, despite the earlier recovery from the April 2019 Easter Sunday terror attacks.

The World Bank had cautioned that Sri Lanka's GDP could contract in the range of 0.5-3.0 per cent, with an almost 44 per cent increase in poverty, in a case of a prolonged COVID-19 outbreak. However, the Central Bank foresees economic recovery starting from the second half of this year.

Revising the GDP growth forecast for the year, the Central Bank projected a 1.5 per cent GDP growth for this year and a 4.5 per cent growth for 2021. In a statement on June 1, the Central Bank had said that the unprecedented crisis triggered by the coronavirus pandemic has severely dented the country's economy, causing a steep fall in the earnings from tourism, remittances and outflow of foreign investment.

The severest impact was recorded in the tourism sector, with a drop of tourist arrivals by over 70 per cent year-on-year in March. Sri Lanka announced its lockdown in mid-March following the detection of the first COVID-19 positive case on March 11.

According to the Johns Hopkins University data, Sri Lanka has 1,914 COVID-19 cases with 11 deaths.