The government is speeding up the implementation of an economic stimulus package essentially to small and medium-scale enterprises (SMEs) including a 1-year suspension of loan recoveries as relief from a growing liquidity situation and the impact of the global financial crisis, a senior official of the Finance Ministry said.
He added that the SMEs will be provided with short-term funds at reduced interest rates from state banks to deter any collapse in SMEs. Banks have also been directed to grant temporary overdraft facilities to this sector and suspend the recovery of loans for one year by evaluating requests on a case-by-case basis. This facility has already been granted to tea factories.
The official said a top level discussion was held at the ministry recently to devise a plan to assist the SME sector and to fast-track the implementation of the stimulus package and clear any obstacles. He said SMEs should look into productive options rather than the retrenching of staff or closing down their businesses. He said that suspending new recruitment, wage freezing or wage cuts and getting more work from workers are some options available for SMEs rather than retrenching people.
The economic stimulus package is being worked out with the assistance of the Central Bank, Bank of Ceylon, People’s Bank and the Finance Ministry. Last week the Bank of Ceylon (BoC) reduced lending Interest rates by 3 % which BoC Chairman Gamini Wickremasinghe says will help to resurrect some of these industries which are facing problems. The People’s Bank also reduced its interest rates by 2% .
But past president of the Ceylon National Chamber of Industries A.K. Ratnarajah says commercial banks have curtailed lending to small industries due to the present cash crunch being experienced.