Sri Lanka holds policy rates, credit slowing, IMF targets met: CB

July 11, 2012 (LBO) – Sri Lanka is holding its key interest rates at which money is injected into the economy at 9.75 percent amid rising inflation, though credit and money supply growth is starting to slow, the Central Bank said. In February energy prices were raised, the exchange partially floated to reduce the need to sterilized interventions, more credit, more domestic demand and further foreign reserve losses.

The Central Bank said growth in broad money defined as M2b fell to 20.9 percent in May 2012, from 29.9 percent in April 2012.

Private sector credit fell from a peak of 35.2 percent in March 2012 to 33.5 percent in May 2012.

“In the meantime, provisional data shows that the growth of import expenditure has been shrinking sharply in the first five months of the year, thereby narrowing the trade deficit, compared to the high levels recorded in 2011,” the central bank said in its July monetary policy statement.

“With weaker global demand, most international commodity prices are also on a declining trend, which should, on a net basis, further ease pressure on the country’s imports this year, although the continuing sluggish global economic recovery may affect export earnings as well.”

Sri Lanka ho