Sri Lanka stays pat on key interest rates

January 18, 2007 (LBO) – Sri Lanka’s central bank Thursday left its key policy rates at current levels, amidst soaring inflation, which is giving savers negative returns.

The repurchase rate stays at 10.0 percent while the reverse repurchase rate, which it pumps cash into the system remains at 11.5 percent, the bank said following its monthly monetary policy review late Wednesday.

Inflation shot up to 19.3 percent in December ’06, as the government relied on commercial and central bank credit to bridge a cash deficit that started to emerge from late February as the north east conflict escalated.

On the external front, the bank said export earnings for the 11-months to November rose 8-percent while imports raced ahead with 15.8 percent, over the corresponding period 2005.

The trade deficit, was financed by a 20 percent growth in private remittances, which expanded by around 2,106 million dollars during the first eleven months of 2006.

“With the increased inflows to the Capital and Financial Accounts the overall balance of payments is estimated to have registered a surplus of 187 million dollars by end 2006,” the statement adds.

The next monthly monetary policy statement is due on February 15.