Such a drop in business refinancing occurred after the central bank reduced the scope of providing refinance facilities through the monetary policy 2022/23.
As per the monetary policy for the current fiscal year 2022/23, the refinance facility will be continued but will be limited to productive sectors including agriculture, small enterprises, exports, and the sectors still affected by the pandemic. “Such facility will be gradually reduced to the amount available in the refinance fund by mid-July 2024,” reads the monetary policy. NRB adopted the policy citing the use of the cheaper credit received under refinance facility in importing goods which led to depletion of foreign exchange reserves. A senior NRB official said that the refinance facility has now come down more or less to the levels of normal times. Before the central bank announced the refinance facility for the businesses hit by Covid-19 through the monetary policy 2020/21, borrowers used to avail limited business refinancing. The outstanding amount of refinancing provided by the central bank stood at Rs 7.49 billion in mid-July 2020. Of which, the general refinance is Rs 5.88 billion, and refinance to earthquake victims was worth Rs 1.61 billion. With the COVID-19-related closure of businesses hitting most businesses hard, the central bank announced a massive refinance package of over Rs 200 billion to revive the businesses. It approved a refinance facility of Rs 148.75 billion during the fiscal year 2020/21. The outstanding amount of refinancing provided by NRB remained at Rs 122.70 billion in mid-July 2021, according to central bank statistics. As many as 48,890 borrowed benefited from the package in that fiscal year, the NRB said. The large package of refinance facilities was continued in the fiscal year 2021/22 too. The central bank approved the business refinancing of Rs 115.70 billion in the fiscal year, benefiting as many as 24,305 borrowers. Because of cheaper interest rates, people tended to receive refinance packages. The specified sectors including export and sick industry received such facilities at three percent while micro, small, and medium enterprises at five percent. All other businesses received the facility at a five percent interest rate. The central bank officials admitted time and again that this flexible policy to revive the Covid-affected businesses was misused to divert funds to other purposes including procuring real estate and financing imports. With the country’s imports surging, gross foreign exchange reserves decreased by 13.1 percent to Rs 1,215.80 billion in mid-July 2022 from Rs 1399.03 billion in mid-July 2021. Fears spread about the country heading in the direction of Sri Lanka and the government imposed an import ban on certain products including vehicles in April last year.
