Mass vaccination to bear fruit shortly
- Effect to be visible in terms of reduced cases, hospitalisations and deaths
- WHO says that all vaccines approved by it were effective against the disease
By Kelum Bandara
Director of the Health Promotion Bureau of Sri Lanka Dr. Ranjith Batuwanthudawa said the effect of mass inoculation of people against Covid would be visible shortly in terms of reductions of infections, hospitalisations and fatalities.
Dr. Batuwanthudawa told Daily Mirror that vaccination had its effect on fully vaccinated people. He said the process is well in progress, and its actual impact on driving transmissions down will be visible shortly.
Sinopharm is the main vaccine being rolled out at the moment.
Besides, Pfizer, Sputnik V, Moderna and AstraZeneca are among the other vaccines being used at the moment.
The World Health Organisation (WHO) has said that all the vaccines approved by it were effective against the disease.
CB hopeful of double-digit growth in 2Q despite lockdowns
- Says low base effects last year would support economy to return to positive territory
- Economy shrank whopping 16.4% in 2Q last year due to virus-related lockdowns
The Central Bank said it expects the economy to have recorded a double-digit growth during the second quarter ended in June, despite the virus-related restrictions took away much of its mojo, as the very low base effects during the same period last year would support the economy to return to positive territory this year.
The Sri Lankan economy shrank by 16.4 percent in the April-June quarter, last year—recording its worst quarterly reading— plunging the economy towards a 3.6 percent decline last year, due to the virus-related lockdowns, which were harsher in nature and lasted long.
The Central Bank remains sanguine over the economy’s ability to record a 5.0 percent expansion in 2021, due to the lower base effects, although some moderation is expected during the second half of the year, due to the virus spread.
“In the second quarter, in spite of the disruptions, due to the third wave, we expect the growth to have been in the double-digit territory,” said Central Bank Economic Research Department Director Dr. Chandranath Amarasekara.
The Census and Statistics Department is yet to release the official second quarter gross domestic product (GDP) data.
More sanguine expectations for the full-year growth is largely premised on the acclimatisation of most economic activities to the new normal and the ongoing rapid vaccination drive, albeit risks to such growth also exist depending on how long the ongoing restrictions would persist.
While much of the economic activities, mostly conducted in-person in office settings, are now almost seamlessly happening remotely, segments designated as essential such as all export industries and their supply chains, agriculture, food and beverage manufacturing and the likes are functioning.
However, a wide swath of the economy, represented by daily income earners, who require in-person engagement to carry out their livelihoods, has been unable to operate, which has made them even poorer.
While the Central Bank is hopeful of around 5.0 percent growth in the economic output, most others have very conservative projections for the Sri Lankan economy, starting with the International Monetary Fund, which projected a 4.0 percent growth in 2021, before the latest round of lockdowns.
Sri Lankan economy was off to a solid start in the first quarter, with a 4.3 percent growth in GDP and was poised to record over 6.0 percent growth for the full year, before the virus-related restrictions were reimposed from mid-April, which later transcended into partial lockdowns.
Despite policy rate hike, CB stresses still in easing cycle
- Says policy rate hike two weeks ago was to address certain imbalances and not end of current policy stance
- CB on Aug. 10 hiked policy rates by 50 bps and banks’ statutory reserve ratio by 200 bps
- CB believes policy actions unlikely to have a meaningful impact on private credit and economic growth
Pushing back on claims made to the effect of reversal in the monetary policy towards a hawkish stance from a dovish stance, the Central Bank said it hasn’t made a turnabout and the measures last week were predominantly aimed at addressing some of the imbalances cropped up in the last few months in the foreign exchange market and also to pre-empt signs of some price pressures.
Last week, in a somewhat surprise move, the Monetary Board raised key policy rates by 50 basis points and banks’ statutory reserve ratio by 200 basis points, visibly ending a more than two-year-long easing cycle, which gathered in intensity since the onset of the pandemic, last year.
But the Central Bank pushed back on how last week’s actions were portrayed or interpreted, adding that it has not changed its policy and hasn’t really changed cycles.
“There is also another point which I have to mention. We have used the words like, ‘easing cycle’ but that does not mean the monetary policy easing cycle is over and we have got into another kind of cycle but I must stress that we are still in this cycle although a little adjustment in the interest rates have been made in order to address some of the short-term problems,” Central Bank Governor Prof. W.D. Lakshman said.
Soon after last August 19 actions, several analysts and economists joined the bandwagon to interpret the move as the beginning of a long cycle of corrective actions towards further tightening of monetary policy and Citibank even forecasted one more rate hike of between 25 to 50 basis points by the end of this year and another 100-150 basis points by next year.
However, the Central Bank has since April this year maintained that it wouldn’t hesitate to tweak its current monetary
In fact, the Central Bank officials, who spoke at the monetary policy presser two weeks ago, didn’t believe their actions to have a meaningful impact on the pace of credit to the private sector or the trajectory of the growth in the economy, which they estimated to be in course for a 5.0 percent growth in 2021.
Their sentiments were a reflection that the policy actions wouldn’t put much strain on the liquidity in the markets, as part of the currency in circulation, which is nearing a trillion rupees, could be drawn back into the system.
Any gaps in liquidity in the money markets should also be met through the Central Bank’s Standing Lending Facility Rate off 6.0 percent.
“I should also add that how the open market operations of the Central Bank work is that, any deficit in the domestic (or overnight rupee) market will be fulfilled by the Central Bank at the Standing Lending Facility Rate, which is at 6.0 percent,” said Central Bank Economic Research Department Director Dr. Chandrananth Amarasekara.
“So, the interbank market is assured that the Central Bank is there to obtain funding at 6.0 percent interest rate under the existing monetary policy corridor,” he added.
IMF SDR will ease pressure on liquidity: Cabraal
- Says CB will take measures to normalise the economic situation
The US $780 million SDR (Special Drawings Rights) received by the government from the International Monetary Fund (IMF) will address some of the current liquidity issues and the Central Bank (CB) will take measures to normalise the economic situation, State Minister Ajith Nivard Cabraal said.
The Minister said the allocation received by Sri Lanka in proportion to its share of the IMF could be used unconditionally.
He said the IMF had recognised the liquidity issues faced by some countries due to shortfalls in US dollar reserves.
- The allocation received by Sri Lanka in proportion to its share of the IMF could be used unconditionally