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* Sri Lanka Central Bank maintains interest rates, current monetary policy appropriate
Fri, Nov 16, 2012, 08:19 pm SL Time, ColomboPage News Desk, Sri Lanka.

Nov 16, Colombo: Sri Lanka's Central Bank has decided to maintain current policy interest rates as its Monetary Board is of the view that the current monetary policy stance is appropriate.

Following its monthly Monetary Board meeting held Friday, the Central Bank said the Repurchase rate would remain at 7.75 percent while the Reverse Repurchase rate remains at 9.75 percent.

Current tight policy measures adopted earlier this year to moderate private sector credit expansion continued to prove effective.

The monetary authority said private sector credit growth declined 25.5 percent, year-on-year in September while the cumulative trade deficit for the first nine months of 2012 contracted for the first time since December 2009.

The trade deficit over the first nine months of the year contracted by 0.3 percent to US$ 6.78 billion due to the significant decline in imports by 3.3 percent despite the decline in exports by 5.8 percent.

The broad money growth in September declined sharply to 18.9 percent in September from a peak growth of 22.9 per cent in April 2012.

Inflation continued its downward trend in October marginally declining to 8.9 percent from 9.1 percent in September mainly due to lower food prices.

The decline in the trade deficit together with higher inflows from workers' remittances, tourism, and capital inflows, resulted in a surplus of US$ 269 million in the balance of payments by end September 2012 while gross official reserves increased to US$ 7.1 billion, the Central Bank reported in its monthly review.

The Central Bank expects the arrival of monsoons to boost agricultural production and further ease the food prices while the rising water levels in hydropower reservoirs to ease the expenses on power generation favoring the economic growth.

The slowdown in global economy, especially in Europe, has negatively impacted Sri Lanka's economic growth and reflecting the downturn, growth of Sri Lankan exports too has decelerated during the last nine months.

Based on those developments in the finances, the monetary board has decided to maintain policy interest rates.

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