Jan 01, 2013 (LBO) – Sri Lanka’s economy has responded quickly to corrective measures and is looking for stronger growth this year with the budget gap for 2012 on track and the exchange rate strengthening again, Central Bank Governor Nivard Cabraal said. “This is the fastest adjustment period in our history,” Central Bank governor Nivard Cabraal said.
“So we can look that at the New Year with a lot of confidence.”
Sri Lanka raised interest rates and hiked energy prices in February 2012 after a sudden spike bank credit take to subsidize energy tariffs from mid 2011 generated balance of payments pressure.
After falling to 134 to the US dollar from 110, the rupee has appreciated to around 127 to the US dollar during the last week of December.
“This is close to the level of 125 that we expected,” Cabraal said.
Though Central Bank stopped rigidly target the exchange rate from February 2012 and allowed the forex market to respond to monetary policy, authorities have loosely signaled 125 to the US dollar as being a desirable rate for this year.
Inflation spiked to upper single digits with the currency depreciation in 2012, putting Central Bank’s record of keeping inflation around mid single digits under some strain.