May 27, 2009 (LBO) – Sri Lanka is planning a central bank re-financed credit scheme for people in former war-affected areas to allow people to rebuild their lives, Central Bank Governor Nivard Cabraal said.
However Cabraal says re-financing would be within reserve money and inflation targets.
“These people need help and society will have to bear the cost,” he said. “But any re-financing would be within our reserve money targets.
“Almost no central bank has had our focus on controlling inflation.”
Sri Lanka’s central bank has been able to halt domestically generated inflation from late last year allowing the country to have the same levels of inflation as the rest of the world by the first quarter of 2009.
Inflation fell in the 12-months to April to 2.9 percent.
The monetary authority has cut rates by 750 basis points this year but reserve money growth has been almost flat after a seasonal spike in April.
Private sector credit growth also turned negative this year.
Clarification Central Bank’s chief economist Nandalal Weerasinghe has responded to this story saying the credit scheme would be limited to repayments from earlier schemes and no new money creatio