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* Sri Lanka Central Bank maintains interest rates, current monetary policy appropriate
Thu, Jan 17, 2013, 09:43 am SL Time, ColomboPage News Desk, Sri Lanka.

Jan 17, 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 Wednesday, the Central Bank said the Repurchase rate would remain at 7.50 percent while the Reverse Repurchase rate remains at 9.50 percent.

Current tight policy measures adopted earlier last year to moderate private sector credit expansion continued to prove effective. However, credit obtained by public corporations, continued to grow, exerting some pressure on broad money growth, the Bank noted.

The monetary authority said private sector credit growth declined 20.7 percent by November 2012 from a peak of 35.2 percent in March 2012.

Cumulative trade deficit for the first eleven months of 2012 contracted by 2.1 percent compared to same period in 2011 increasing the gross official reserves.

For 2013, the Central Bank, expecting an improved trade balance, increased earnings from service exports, higher workers' remittances, and increased inflows to the government and capital markets from foreign direct investments, targets a higher Balance of Payment (BOP) surplus.

According to the Bank, due to the significant foreign inflows, the rupee has appreciated by 5.3 percent against the US dollar during the second half of 2012 and further appreciated by 0.6 percent by January 15.

Inflation eased in December 2012 to 9.2 percent and the Bank expects it to moderate from March 2013 and reach mid-single digit levels.

The Central Bank would monitor the credit disbursements by banks to private sector to keep the credit growth at around 18.5 percent in 2013.

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

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