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Government promises to give positive interest rates to savers but the budget revealed a plan to short-change state pension funds.



Government promises to give positive interest rates to savers but the budget revealed a plan to short-change state pension funds. The Finance Minister said in the budget the government plans to convert rupee loans to low cost medium to long term debt.

The Rs. 68 bn loans are held by state managed pension funds like the EPF and the ETF.

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The Finance Minister says they expect to save up to Rs. 1.1 billion next year alone through the move.

Inflation in Sri Lanka is now 12-14 percent.

Interest rates are 7-8 percent, as a result the real interest rate is negative.

What this means is the money that a saver gets at maturity will buy fewer goods than the same money would have bought at the beginning of the year.

This means the saver is cheated out of his wealth by inflation.

This has been happening from July.

The 2005 budget speech in principle gave an undertaking to get interest rates back to positive territory.

"Regulatory supervision and surveillance by the Central Bank