Sept 18, Colombo: Sri Lanka's Central Bank has decided to maintain current policy interest rates as the Monetary Board of the Bank believes that the current monetary policy stance is capable of delivering the expected economic growth.
Sri Lanka's economy recorded a robust growth of 7.2 percent during the first half of the year, according to the estimates by the Department of Census and Statistics.
Following its monthly Monetary Board meeting Monday, the Central Bank said the Repurchase rate would remain at 7.75 percent while the Reverse Repurchase rate remains at 9.75 percent.
Earlier in the year the strict measures implemented by the Central Bank and the Government to curb the high demand for imports and credit are yielding results, the Central Bank said in a statement today .
Credit obtained by the private sector has decelerated since the second quarter of 2012, and the policy measures in place are expected to help ensure that the growth of credit will be within the desired level at year end, the monetary authority noted.
Compared to the average monthly credit expansion of about Rs.52 billion in the first three months, average monthly credit decelerated to around Rs.27 billion during the period from April-July.
However, according to the Central Bank the amount of credit available has been sufficient to facilitate reasonably robust economic activity as indicated by the robust economic growth despite high fuel prices and drought.
Inflation, which increased in June and July, largely due to domestic supply disruptions has eased somewhat, recording a year-on-year change of 9.5 per cent in August.
The Bank expects the demand management policies adopted by the authorities to help contain inflation within single digit levels in the next half of the year.
Although the export growth declined in the year, the growth of imports has also decelerated considerably since April outpacing the decline in exports and resulting in a continued improvement in the balance of trade, the Central Bank pointed out.
"Such improvement, together with sustained inflows on account of workers' remittances and enhanced tourist earnings have helped narrow the deficit in the current account balance," the statement said.
The revenues combined with the foreign inflows to the Colombo Stock Exchange, foreign investment in government securities and the US$ 1 billion sovereign bond offered in July have helped to raise the gross official reserves to US$ 7.1 billion by July, the Bank said in its statement.