Finance Minister pledged to lower growth in the monetary base, the main instrument in the conduct of Monetary Policy in Sri Lanka

Finance Minister pledged to lower growth in the monetary base, the main instrument in the conduct of Monetary Policy in Sri Lanka, in a letter to the IMF while also asking for help to recover from the Tsunami. Finance Minister pledged to lower growth in the monetary base, the main instrument in the conduct of Monetary Policy in Sri Lanka, in a letter to the IMF while also asking for help to recover from the Tsunami. Monetary aggregates were 5 percent above target last month because of credit expansion in the private and public sector according to the Central Bank.

However, no mention was made about Central Bank’s Treasury Bill holdings that increased by Rs. 60 billion last year.

Monetary aggregates are at the highest variance to targets since the introduction of the Monetary Law Act that gave Central Bank more independence.

Central Bank said it would absorb this access liquidity with aggressive open market operations after its monthly review of benchmark interest rates on Wednesday.

The bank left the Repo rate by which it drains money from the banking system at 7 and a half percent and Reverse repo rate at 9 percent.

The Repo rate sets a floor for the call money market by enabling the investm