CB Chief assures adequate tools to address potential liquidity issues

Despite a limited amount of Treasury Bills available for monetary policy operations, the Central Bank assured yesterday that sufficient instruments and tools are at hand to manage any potential liquidity issues.

“Based on our projections, there could be a gradual reduction in liquidity over the next few months as all Treasury Bills will mature. However, we have sufficient instruments available if needed,” Central Bank Governor Dr. Nandalal Weerasinghe said addressing the media at the post-Monetary Policy review meeting yesterday.

The Central Bank’s reassurance comes amid concerns over the availability of Treasury Bills for monetary policy purposes, whilst highlighting its commitment to ensuring financial stability and effective interest rate management in the face of potential liquidity challenges.

He emphasised the availability of options in the secondary market and open market operations to maintain interest rates effectively. 

“The main purpose is to maintain the interest rates,” he added.

He further highlighted the flexibility of the Central Bank to purchase securities from the market if necessary. 

“There could be borrowing from the securities or the market,” Dr. Weerasinghe explained.

Central Bank Assistant Governor Dr. C. Amarasekara reiterated the Governor’s confidence, stating that the CBSL is prepared to address any liquidity issues as they arise. 

“There are several tools. We have previously used the Statutory Reserve Ratio (SSR) to absorb liquidity,” he added.