May 29, 2009 (LBO) – A central bank supported credit scheme to help war-affected Sri Lankans will not use printed money, but cash from a revolving credit facility separately managed by the monetary authority, a top official said. Sri Lanka’s central bank is planning a re-finance to jump-start lending to the war-affected so that they can re-build their lives quickly.
“We will be providing two billion rupees and the money will be from rural credit funds managed by us,” Central Bank’s chief economist Nandalal Weerasinghe said.
“When the repayments come from the existing credit schemes they will be re-directed.”
The central bank also started a credit scheme for tsunami affected people in 2004. Re-finance can lower the funding cost of banks and encourage lending as banks do not have to wait until new deposits come to lend money.
There had been concerns that the central bank would advance ‘printed money’ in line with a practice adopted by the monetary authority in the 1980s which critics say contributed to inflation and economic instability in the past.
But Weerasinghe said no new money would be created for the planned facility and it would be limited to repayments from existing schemes.
In 2009 the