Swati Bhat and Uditha Jayasinghe

COLOMBO (Reuters – Sri Lanka’s central banks governor stated that he would stay as bank head given an improvement of political stability amid an economic crisis. However, he did not resign from his post as he previously said.

P. Nandalal Weerasinghe, Governor of Sri Lanka’s Central Bank stated that the bank had nearly completed plans for restructuring the debt of the country and would submit proposals to cabinet members soon.

On May 11, Weerasinghe informed reporters that he would be stepping down in two weeks without political stability, as the bank’s efforts to solve the financial crisis will not succeed in political turmoil.

Weerasinghe spoke to journalists after the bank declared that its key borrowing and lending rates would remain stable.

“In the past, there were no prime minister or cabinet. He said that there had been notable improvement in comparison.

“We have now made new appointments. Our measures have been proven to be effective. A finance minister would be a great idea. We are now seeing improvements, so I believe on that basis I will continue,” he stated.

Ranil Wickremesinghe, an opposition parliamentarian was elected prime minister and has already made four cabinet appointments. He has yet to name a minister of finance.

This nation, home to 22 million citizens, is currently in a terrible economic crisis. Tax cuts implemented by President Gotabaya Rajapaksa have depleted government funds. COVID-19 also hit important tourist industries and eroded foreign exchange reserves.

Following a 7-point increase in interest rates, the central banks held rates stable and reiterated its need to implement more fiscal policies and maintain political stability for the country that is currently suffering from the crisis.

Weerasinghe indicated that debt proposals were almost complete and would be ready for the Cabinet to approve by Friday.

He said that inflation could increase to 40% over the next two months. But, this was driven largely supply-side pressures. Government and bank measures were already reducing demand-side inflation.

The April inflation rate was 29.8%, with the food price increasing by 46.6% annually.

JPMorgan, a U.S.-based investment bank (NYSE:), backed Sri Lanka’s crisis-hit bonds Wednesday. They said recent political changes would gradually ease its strains as well as help it talk with the International Monetary Fund.

Officially, Sri Lanka has entered default. The grace period for making some bond interest payments that were already due expired Wednesday.

“We are in pre-emptive default. It can have technical definitions… For them, it is a default. We are very clear that until there is debt restructuring, we can’t repay,” Weerasinghe stated to reporters.