Sri Lanka state workers receive billions in subsidized housing credits

Oct 30, 2009 (LBO) – Sri Lanka’s state workers have recieved billions of rupees of housing loans at rates as low as 4.0 percent while homeless ordinary citizens were forced pay high rates as fiscal deficits pushed interest up, it has been revealed.

Under a presidential directive issued this week, state banks have been ordered to process a further 20,939 applications for subsidized housing loans by December 10.

Financial analysts say banks that give loans at rock bottom rates to one class of citizens would then charge higher rates from other customers to prevent their banks from making losses and becoming unstable.

State banks are active in rural areas and raise deposits country-wide. During the high inflation period from 2004, state banks have kept savings rate as low as 5.0 percent giving negative returns to savings accounts holders, while inflation shot up.

Chronic high inflation due to fiscal dominance of monetary policy has kept inflation and poverty high for more than half a century, despite unemployment coming down, since a central bank was created in 1950 with money printing powers.

Currency depreciation, weak productive sector growth has also made more than a million people go abroad for menial jobs.

In the pas