April 23, 2008 (LBO) – Sri Lanka’s private sector credit growth has fallen to 15.8 percent in February from the highs of 25 to 26 percent reach in 2007, but credit to state enterprises should fall further, the Central Bank said. “Although credit to public corporations also declined to 47.5 billion rupees during the month of February, further decline in the coming months is warranted in order to reach the desired levels,” the Central Bank said in its April monetary policy statement.
In March the central bank said private sector credit growth fell to 18.3 percent. The International Monetary Fund showed last year said the country’s inflation is ‘synchronised’ with government credit developments.
Sri Lanka no longer use policy rates to manage inflation but uses a quantity targeting regime where the monetary base or reserve money is controlled.
Policy rates have not been adjusted for more than a year and liquidity is provided to the banking system at rates of between 12.00 and 19.00 percent through discount windows with restrictions.
“Reserve money, which was maintained within the quarterly targets during 2007, was well within the first quarter target for 2008,” the central bank said.
“The broad money suppl