Empower your business in Sri Lanka and internationally with Prifinance expert corporate and financial services. Streamline company formation and investment opportunities with our tailored advice and solutions.

Central bank holds rates unchanged; private sector credit up 21 pct

Sept 25, 2015 (LBO) - Sri Lanka's central bank held key interest rates unchanged on Monday despite credit to the private sector rising 21 percent due to low interest rates amid a further drop in foreign reserves. The Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank were left unchanged at 6.00 per cent and 7.50 per cent, respectively. "The increased credit flows to the private sector have been sustained mainly due to prevailing low market interest rates amidst low inflation environment," the central bank admitted. The decision was mostly expected by market participants with some acknowledging that hiking interest rates, as per the suggestion of the IMF, would be a politically difficult decision to make. The gross official reserves, which stood at 6.8 billion dollars at end July, decreased to 6.4 billion dollars by end August. "Official reserves are expected to increase during the remainder of the year with the expected long term external financial flows to the government," the statement said. The trade deficit narrowed in July, and a seven percent depreciation of the rupee so far this year would further support the current account, it said. Core inflation increased to 3.9 per cent in August 2015 on a year-on-year basis, from 3.5 per cent in the previous month. "Headline inflation is expected to remain comfortably within 2.0-3.0 per cent by year end, supported by improved domestic supply conditions and subdued global commodity prices," the monetary authority said.  
Notify of
Newest Most Voted
Inline Feedbacks
View all comments
8 years ago

Rather than political it seems economic.The only working engine for SL @ this moment seems to be the growth.In war when cornered one could duck & hide & be a sitting duck or shoot ones way through to safety.CB seems to be preferring the latter.Now which strategy is correct.There is no 100% correct prediction @ a time other CB’s of the world too are trying with available tools.For the latter strategy(growth) to be effective focused work must happen in the country & improving exports is a must.(Let us ponder how few schemes to improve export crops may be mishandled(purposely or other wise) paving the way for more imports by weakening local production on another day) .

Navin Karunatilaka
Navin Karunatilaka
8 years ago

Messing around with monetary policy will only get short term results. For long term prosperity, wellbeing and freedom the only solution is balancing the budget. But this will never happen as a lot of unpopular decisions will have to be taken including, reforming the tax code (elimination of the regressive income and corporate taxes and have a simple single tax like GST/ VAT), reducing the size of government (mass scale privatisation and deregulation) and land reform (especially freeing up so called paddy land).

Would love your thoughts, please comment.x