CBSL to establish permanent single-digit interest rate structure in economy

Jan 04, 2021 (LBO) – Capitalising on the achievement of 12-years of single-digit inflation, the Central Bank intends to establish a permanent single digit interest rate structure in the economy, Governor W D Lakshman said.

Introducing the monetary and financial sector policies for 2021, Governor said that they will remain focused on maintaining market interest rates at single-digit levels going forward.

“The business community will benefit from low-cost borrowing facilities corresponding to a low interest rate regime. This is imperative to promote investment and entrepreneurship in the country, the needed foundation for sustained high economic growth,” he said.

“The availability of low-cost funding on a sustainable basis would encourage businesses, including start-ups, to venture into new industries and sectors that have high growth potential.”

According to the Governor, the Central Bank will continue to remain vigilant but is confident that inflation will remain within the targeted range of 4-6 percent over the medium-term.

Proactive Government policies are expected to address such supply side factors, helping the Central Bank’s efforts to maintain inflation in the envisaged range.

“Low lending rates and adequate levels of liquidity in the market would help channel funds to the private sector in the form of low-cost loans,” he said.

“The Central Bank expects credit to the private sector to expand by around 14.0 percent in 2021 and at least by around 12.0-12.5 percent annually over the medium-term, thereby supporting the envisaged growth of the economy.”