Sri Lanka policy rates unchanged; credit picking up: Central Bank

Chief Regulatory Officer at CSE Renuke Wijayawardhane presenting the listing certificate to Executive Chairperson at Renuka Hotels Shibani Thambiayah

Feb 17, 2014 (LBO) – Sri Lanka’s central bank kept policy rates steady in February signaling that gilt rates are bottoming out but said longer term lending rates have more room to fall.

The central bank said it was keeping the rate at which excess money is drained from the banking system at 6.50 percent and the rate that money is generated at 8.00 percent.

In January inflation was 4.4 percent and “is expected to remain comfortably at these levels throughout 2014” the central bank said.

In 2013 loans to industry and services had grown by 200 billion rupees, up from 167 billion in 2012. Pawning and agriculture credit has fallen.

In the 12-months to December credit had grown 7.5 percent up from 7.2 percent a month earlier.

The central bank is expecting credit to grow 16 percent this year.

Update II “Whilst deposit interest rates and rates on Government securities have indicated signs of stabilising at current levels, longer term lending rates, which displayed some downward adjustments in January, have space to decrease further,” the Central Bank said in its February monetary policy statement.

Pressure from state borrowing from domestic markets