Sri Lanka policy rate unchanged, growth projected at 7.2-pct for 2012

June 13, 2012 (LBO) – Sri Lanka is maintaining it key policy interest rate at which money is injected to the banking system at 9.75 percent, and the growth is expected to be 7.2 percent for 2012, despite a contraction in trade, the Central Bank said. Sri Lanka raised rates and increased energy prices in February after the exchange rate came under pressure from high credit growth particularly by state energy enterprises which were manipulating prices.

The Central Bank said in April private credit fell to 18.7 billion rupees. However credit to state was over 40 billion rupees in the same month.

Imports fell 3.3 percent in April.

“The cumulative trade data for the first four months of 2012 indicate that imports are decelerating at a rapid pace in line with the policy measures adopted,” the Central Bank said.

“However, notwithstanding the incentives provided for exports as a result of the policy measures, exports too have declined year-on-year, due to global developments.”

A contraction in trade is an indicator of a slowdown in domestic economic activity.

The Central Bank said it was maintaining a 7.2 percent growth forecast for 2012 with first quarter indicating strong growth though the pace may slow in subsequent months.