Sri Lanka policy rates steady, credit expected to slow: Central Bank

Sept 16, 2011 (LBO) – Sri Lanka has kept policy rates steady at 7.00 percent to deposit excess reserves and 8.50 percent to inject cash as rupee liquidity in monetary markets declined, expecting credit growth and forex interventions to ease in the future. The Central Bank said broad money grew 20.7 percent in July from a year earlier led by “robust expansion” of private sector credit, but it may slow down, partly due to a “slowing down of both advanced economies as well as emerging economies.”

“Our general information is toward the end of the year credit growth will taper down,” Central Bank Governor Nivard Cabraal said.

The economy had grown around 8.0 percent in the first half and inflation was expected to ease further.

Sri Lanka’s statistics office said gross domestic product an estimated 8.2 percent in the second quarter of 2011 from a year earlier.

Industry, which has a 29 percent share in the economy grew by 9.4 percent (up from 9.2 percent last year, and services which has a 58 percent share grew 8.8 percent (up from 8.8 percent last year).

Agriculture which only has a 12 percent share slowed to 1.9 percent, down from 6.3 percent last year. In the first quarter there had been a contraction.

“The contribution of the a