Sri Lanka expects 7.8-pct growth and 5.0-pct inflation in 2014

Manjula Mathews, President of the Board of Directors of Habitat for Humanity Sri Lanka (L) and Yu Hwa Li, National Director of Habitat for Humanity Sri Lanka (R) present Rakhil Fernando, Managing Director of Daraz (C) with Goodwill Ambassador Certificate

Jan 03, 2014 (LBO) – Sri Lanka is expected to grow 7.8 percent in 2014 as business activities pick up with inflation targeted at 5.0-pct, Central Bank Governor Nivard Cabraal said. Sri Lanka has a pegged exchange rate, loosely anchored to the US dollar and money printed by the Central Bank through domestic asset acquisitions tends to generate balance of payments trouble and higher-than-US inflation when credit growth is strong.

Cabraal said policy would be tightened if ‘demand driven’ inflation and expectations pick up, signs of economic overheating occur, aggregate demand expands at a ‘high’ rate and ‘excessive’ monetary and credit expansion takes place.

The Central Bank expects reserve money – or the monetary base generated by the agency where final transaction in the economy are cleared – to grow 14 percent in 2014 up from an estimated 0.9 percent in 2013.

Broad money – which includes bank deposits – is expected to grow 16 percent from 8.0 percent.

Credit to the private business is projected to grow 16 percent in 2014, up from 8.0 percent.

The Central Bank, which has a monopoly in money, is the only agency that can generate or limit inflation in a country