Sri Lanka economy grew 5.2 pct in first nine months : CB-Updated

(Updated with Central Bank presentation)

Dec 31, 2015 (LBO) -Sri Lanka’s economy grew 5.2 percent during the first nine months of the year compared with 2.4 percent growth during the same period last year, the Central Bank said on Thursday.

Strong credit growth to the private sector seeping out as consumption imports was, however, a concern amidst rising inflation, Central Bank Governor Arjuna Mahendran said at the media briefing.

“Our reserves are comfortable at this point. We have over four and a half months of imports. Admittedly some of it is borrowed, but the country is in no dire need of emergency funding of any sort,” he said.

Foreign governments including China was willing to provide concessional funding, and these options are being explored, he said.

“There is no need to speculate on the IMF coming to the rescue. We are trying to ensure to the international community of investors that Sri Lanka’s economy is on a stable course.”

Informal consultations with the IMF were going on and discussions with a mission would take place in February, he added.

Foreign direct investment would come in at around 800 million dollars, with improper accounting for foreign investment inflating figures in the past.

Key points from Central Bank press conference:

-Sri Lanka’s SRR is lower than many countries, we believed it was appropriate to adjust upwards partly to curtail credit growth: CB Governor
-We didn’t think it was appropriate to increase interest rates, which higher than inflation offering real returns: CB Governor
-Will have to review interest rates if Fed raises interest rates by March: CB Governor
-Depending on how inflation performs, we will have to look at interest policy: CB Governor
-Dormant banks accounts will not be taken over, normal procedure is accounts dormant for 10 years will still be available to the owners who claim it.
-Primary Dealer capital requirement increased to 1 billion from 300 million after discussions with them, which all companies meet.
-No knowledge of private placements of bonds by Central Bank, all bonds going through auctions: CB Governor
-Bank of Ceylon will get bonds of 50 billion, where government directly issued to CPC or SriLankan, this may be such a case.
-Visit of George Soros will put Sri Lanka in limelight and a positive step for foreign investment