Central Bank further tightens Monetary Policy Stance

The Monetary Board of the Central Bank, at its meeting held on 03 March 2022, has decided to reinforce its stance adopted in January 2022.

Accordingly, it has been decided to;

a) increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points each, to 6.50 per cent and 7.50 per cent, respectively;

b) revise upwards the caps imposed on interest rates applicable to credit cards to 20 per cent per annum, on pre-arranged temporary overdrafts to 18 per cent per annum, and on pawning facilities to 12 per cent per annum. Directions to effect these regulated interest rates will be issued shortly.

The Monetary Board is of the view that the above measures will dampen the possible build-up of underlying demand pressures in the economy, which would, in turn, help ease pressures in the external sector, thus promoting greater macroeconomic stability.

The Central Bank also advises the Government to diligently consider;

a) introducing measures to discourage non-essential and non-urgent imports urgently based on the previous recommendation made by the Central Bank

b) increasing fuel prices and electricity tariffs immediately, to reflect the cost

c) incentivising foreign remittances and investments further

d) implementing energy conservation measures, while accelerating the move towards renewable energy

e) increasing government revenue through suitable tax increases on a sustained basis

f) mobilising foreign financing and non-debt forex inflows on an urgent basis

g) monetising the non-strategic and underutilised assets, and

h) postponing non-essential and non-urgent capital projects.

The above measures would ensure that a coordinated approach is adopted to overcome the challenging economic circumstances faced by the country and to prudently exit the COVID-related policy accommodation.

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