Sri Lanka central bank says will maintain tight policy

April 30, 2008 (LBO) – Sri Lanka's central bank will continue to maintain tight monetary policy to cope with the current economic turmoil, uncertainty and high prices, a senior official said. "Monetary policy will continue to be tight," said Ranee Jayamaha, deputy governor of the Central Bank said Wednesday.

"The exchange rate and the interest rates are expected to be stable and regional growth prospects are likely to gather momentum during 2008."

Sri Lanka's export growth in 2008 is projected to be around 10 percent while imports are projected to grow by around 11 percent, Jayamaha told a symposium for bank directors on risk management, governance and compliance.

"Given the increase in food and oil prices, the trade deficit is likely to increase sharply and the current account deficit as a percentage of GDP is expected to be around four percent."

Remittances from Sri Lankan migrant workers, projected to increase to 2.8 billion dollars in 2008, would be the main factor capable of reducing the trade deficit.

The current financial turmoil is expected to result in a slow down in the US and EU economies.

This could create spill over effects on emerging markets like