CB says full-scale lockdown could deal lethal blow to low-income earners

• More than a third of Sri Lanka’s population in low income bracket 
• Calls for balanced approach towards containing measures and economic implications 

The Central Bank yesterday insisted on striking a balance between the COVID-19 containing measures and their implications on the livelihoods of millions of people as the authorities contend on how to deal with the virus while maintaining a working economy, even at sub-optimal levels. 

Weighing in on the best possible way forward to minimise the economic fallout of the virus and its related restrictions, the Central Bank said although a full closure of the economy might slowdown the virus spread that could have cataclysmic implications on millions of people who depend on daily incomes.

The Central Bank said at least 30 to 40 percent of the population is in the low income bracket, and thus a complete closure of the economy could devastate their living standards. 

There is a growing chorus from those who are in the health sector and trade unions, who are salaried employees, for a full scale lockdown to deal with the epidemic.   

“I think those who make these decisions in the government should be doing or already may be doing is to weigh the views coming from both the healthcare sector as well as from those in the economy and related institutions, to arrive at decisions and policies which can make the least negative implications on the economy,” said Central Bank Governor Prof. W.D. Lakshman. 

Bureaucrats in the healthcare sector, who dominate these task forces appointed to deal with the virus, have been calling for a complete lockdown of the country for them to slow the spread, and their stance has been gaining more prominent since of late. 

“The Central Bank’s stance on this matter is that we must take both sides into account because a full economic closure could aid in slowing the spread but such an action could inflict massive damage to the marginalised sections of the society,” Prof. Lakshman said. 

“The most who feel the worst brunt of a dysfunctional economy are the 30 to 40 percent in the lowest income bracket in this country. 

And we have the responsibility to look after their living standards. And when you consider these responsibilities, if the current mechanism being followed in dealing with the virus becomes successful, I think we can avoid a disaster being inflicted into their livelihoods,” he added. 

Meanwhile, the Central Bank stressed that Sri Lanka cannot afford another economic contraction in the scale of what was seen during the 2Q20 once again. Sri Lankan economy shrank by 16.4 percent in 2Q20 and by 3.6 percent in 2020. 

As a result, the Central Bank is currently revisiting its growth projections made for the economy this year, as current restrictions will not take the economy to 6 percent growth as envisaged.