Govt has reduced interest rates and given relief to people - Shehan Semasinghe | Sunday Observer

Govt has reduced interest rates and given relief to people - Shehan Semasinghe

27 December, 2020

State Minister of Samurdhi, Household Economy, Micro Finance, Self-Employment and Business Development, Shehan Semasinghe said considering this difficult period as well as keeping to the promise given by President Gotabaya Rajapaksa, the Government has brought down the interest rates. The rupee against the Dollar is now between Rs.180 and 186 which was almost Rs.200 when the Government took office.

The State Minister in an interview with the Sunday Observer said in the circumstances and having taken over one of the worst economies ever, the Government has been able to give some relief to the people and the local business sector.

However, there are times when the directives given by the Central Bank and the Government have not been adhered to by certain financial and non-financial institutions. We are now relooking at the crib which is one of the biggest challenges for anybody going for a credit or a financial facility.

State Minister Semasinghe said Prime Minister Mahinda Rajapaksa has given instructions to banks especially, state banks as well as the crib to look at more flexible ways of extending financial facilities to the people.

Q: Unlike previous Governments this Government expanded the scope of state banks to help the local business sector to tide over difficulties. Could you explain this in detail?

A: We have extended the facilities and given moratoriums and extended loans, while the interest rate which was nearly 30 percent or even higher has now come to almost a single digit. That itself is a big achievement of the Government and businessmen could make use of it.

Of course, the environment is not the most conducive for businesses. However, considering the difficult period as well as keeping the promise given by President Gotabaya Rajapaksa, we have brought down the interest rates.

The rupee against the Dollar is now between Rs.180 and 186 which was almost Rs.200 when we took office. So, under the circumstances and with one of the worst economies ever taken over by the Government we have been able to give relief to the people and the local business sector.

However, there are times when the directives given by the Central Bank and the Government have not been adhered to by certain financial and non-financial institutions. We are relooking at the crib, one of the biggest challenges for anybody going for a credit or a financial facility. Prime Minister Mahinda Rajapaksa has given instructions to banks especially state banks as well as the crib to look at more flexible ways of extending financial facilities to the people.

Q: Has the Government introduced any new changes to the self-employment schemes and if so what are they?

A: There will be several schemes implemented from January 2021. We will extend them to Samurdhi Banks as well with an interest rate of seven percent.

The Samurdhi Bank system which had a maximum ceiling of Rs.200,000 for borrowings, has now been raised to Rs.1.5 million and we are looking at the possibility of going up to Rs.2 million, and accelerating interest by seven percent.

We plan to empower small scale entrepreneurs as well as the people with financial support through the Samurdhi Bank system. Also, in the Budget proposals the Prime Minister has proposed a Development Bank. These changes will enhance a business-friendly environment in Sri Lanka, and anybody can go for loans below 10 percent interest, including housing loans.

Q: Does the Government have a blueprint on business development and what are the sectors to be promoted?

A: We don’t have a specific restriction on any sector. We will assist anybody willing to do a viable project and expand the business.

Q: The Government is optimistic that debt servicing causes no problem, but the Opposition reiterates that the country is heading for disaster. What is the actual situation?

A: I agree with the Opposition because they led the country into a disaster. So, they should be happy that we have at least taken some steps to take the country out of the disaster. Debt servicing has never been a problem even during the battle against terrorism.

The country has borrowed money and we have to service the debt but the amount of debt whether local or foreign will be measured in terms of the productivity of the country which was hundred percent against productivity up to 2015 and we brought it down to 70.7. Again, productivity and debt percentage were increased to 92 percent during the Yahapalana Government.

They have taken loans, but we don’t see any tangible things happen from the loans they have taken. If you take the port which was leased out for two terms of 99 years each, what happened to that money? It has not paved off the debt for the loan. Still, the Ports Authority is servicing the debt. We don’t have an issue in debt servicing because we have managed the economy.

Of course, at times we had to take difficult decisions, as in the case of turmeric for example. Although the Government is being criticised at certain forums, we are confident that local production will reach the market by February and March next year.

We have restricted non-essential imports, but we have allowed raw materials needed for production and other essential items to be imported. We have taken decisions based on the fact that the country needs to go forward within the next couple of years.

Q: Are we not going to streamline the entire microfinance scheme to alleviate the misery of the poor people?

A: It will be streamlined, and we will introduce a new system of giving financial literacy to the main areas affected especially, the North, East, North Central and Uva provinces which are trapped in microfinance debt. From January, we will launch an awareness campaign on financial literacy. We will also get Samurdhi Banks and other Government institutions to give them micro-financing at a much lesser rate than the current rates.

They have gone to the extent of charging an interest of 176 percent. I met the practitioners last week, and explained the Government’s thinking and policy. We will not take away the opportunities of any private sector company in the market. However, they should fall in line with the Government’s policy. Now they are charging a minimum rate of 40 percent, which is too high.

With the financial literacy program we will introduce a low-interest scheme. Micro-financing might have a higher cost of finance because of the risk as they are given without any collateral. However, these exorbitant interest rates cannot be permitted. We are also amending the 2016/06 Act on micro-financing, which has been designed to protect western interests and not the locals Only four companies have been registered under this Act.

All other companies in operation are not registered under this Act. We have recalled the amendments presented to the AG’s Department and we will study it thoroughly. I have instructed the private sector micro-financing organisations to make suggestions so that we can consider their interests as well. We will ensure that the borrowers and the lenders are protected.

Q: The Gazettes have failed to deliver goods to the people. What went wrong?

A: The Gazette notifications that were issued were changed several times to match the requirements and ensure practicality. In the open market, sometimes the Government has to interfere and control the price, but it is not the most ideal way of controlling the price. In this Maha season, the Government will purchase 8 to 10 percent of paddy grown with the fertiliser subsidy and have a buffer stock.

The main reason for not being able to control the prices of rice was because there were no buffer stocks. The buffer stocks had been sold for animal food. Secondly, the moment the Government tried to purchase the paddy, businessmen had taken the entire paddy harvest from farmers at a very low cost.

Thirdly, we will strengthen small and medium scale rice mills, and even go to the extent of having mobile storage for paddy.

Q: The Opposition complains that the Government has failed to meet the demand for fertiliser, especially for paddy farmers. What are the difficulties in supplying fertiliser?

A: There is absolutely no shortage of fertiliser. There was a delay in delivery for one week because the distribution channels were affected by the Covid-19 pandemic situation. The employees of the main Hunupitiya storages were affected by Covid-19. Hence, there was a delay. We got the Civil Defence Force to intervene and carry out the distribution.

The Opposition is now headless and makes random statements just to create issues. The Government has instructed even the licensed private companies importing fertiliser to increase their distribution channel and their number of agents next year, so that there won’t be a shortage. We will expand and repair the fertiliser storages in villages and have a proper system of distribution.

Q: Until the UNP sheds its subservience to western interests, it will never regain public faith to come to power. Your comments?

A: They will continue with that. It was very unfortunate that Opposition MPs in Parliament said the present Government should face human rights violations, accusing us of human rights violations.

They said action will be taken against Sri Lanka for human rights violations. This is the same scenario they followed during the battle against terrorism. The same strategy will be followed in the coming years.

Q: Would you comment on the Government’s decision to open the airport and the country for tourists from December 26?

A: All other countries are now having liberal thinking on the situation. The airport needs to be opened and we have to follow the strict health guidelines issued by the health authorities and carry forward the operations. We hope all tourists who come will act with responsibility.

Q: Is there any truth in media speculations that the SLFP, the main constituent partner of the SLPP led Government is going to quit and act separately in Parliament due to internal clashes?

A: I really don’t know what the SLFP will do. However, the SLFP has quit our Governments several times. It may not be so officially as a party, but individuals have taken decisions and skipped out. However, when the SLFP had a coalition with the UNP, they never had a problem with the UNP.

They never criticised the UNP. The moment they formed a coalition with the SLPP, they tried to criticise. Those who criticise the SLPP were confirmed partners of the Yahapalana Government. We went through a difficult period to form our Government but certain SLFPers will not know how difficult it was to form the Government because they gained power on a platter.

They have been partners in every Government. That cannot happen. When they were with the UNP they were defeated and the people rejected them. We were also SLFP members. We had to quit the party and form ‘Pohottuwa’ to fight the UNP. They have been in the UNP led Government and if they try to pinpoint at ‘Pohottuwa’, we will not allow that. What I understand is they are always craving for power, not anything else.

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