The Monetary Board of the Central Bank has decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 200 basis points to 11.00 percent and 12.00 percent, respectively.
The Board expects that the market interest rates particularly lending rates, will adjust downwards adequately and swiftly and the financial sector is urged to pass on the benefits of this significant easing of monetary policy to individuals and businesses, thereby supporting economic activity to rebound in the period ahead.
As per the latest projections of the Central Bank, headline inflation is expected to decelerate further and reach single-digit levels by early Q3-2023 and stabilise around mid-single-digit levels over the medium term.
According to the leading indicators, economic activity is estimated to have remained subdued in Q2-2023 as well, reflecting the protracted impact of the economic distress in 2022 coupled with the tighter monetary and fiscal policies implemented to bring in greater macroeconomic stability.
However, the economy is projected to recover gradually towards late 2023, supported by policy normalisation led by the easing of monetary conditions, improvements in supply conditions supported by strengthened foreign exchange liquidity, the gradual relaxation of import restrictions, enhancement in business and investor sentiment, and the impact of policy measures and structural reforms being implemented to promote economic growth.
The level of gross official reserves is estimated at around US dollars 3.
Meanwhile, credit to the private sector by licensed commercial banks (LCBs), including the SME sector, continued to contract in May 2023.
However, a gradual turnaround is expected in credit to the private sector with the easing of monetary conditions and the envisaged rebound of economic activity.