Sri Lanka inflation seen falling to 8-9% by mid-2009: central bank

Jan 02, 2009 (LBO) – Sri Lanka’s inflation rate expected to fall to 8.0 – 9.0 percent by mid-2009, central bank governor Nivard Cabraal said. Cabraal said inflation has been coming down since July 2008 and that inflationary expectations also show signs of moderating.

“Also, interest rates are expected to follow the decline in inflation,” Cabraal said.

Cabraal said that with the decline in inflation the central bank may have to ease its monetary policy “to a certain degree in 2009” to stimulate the economy.

Cabraal’s comments came in his monetary policy announcement for 2009 where he outlined the central bank monetary and financial sector policies for 2009 and beyond.

Cabraal said Sri Lanka’s economy is expected to grow 5.0 – 5.5 percent in 2009 and that a
state stimulus may increase it to six percent.

The overall budget deficit is expected to fall to 6.5 percent in 2009 from seven percent in 2008.

Cabraal also warned that the government sector would have to keep a tight control of its spending if the monetary policy programme was not to be derailed.

“The realisation of monetary aggregates depends on the c