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* Sri Lanka maintains policy rates, current monetary policy appropriate
Tue, Apr 22, 2014, 09:43 am SL Time, ColomboPage News Desk, Sri Lanka.

Apr 22, 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.

Accordingly, the Standing Deposit Facility Rate (Repurchase Rate) would remain at 6.50 percent while the Standing Lending Facility Rate (Reverse repurchase Rate) remains at 8.50 percent, the Central Bank announced Tuesday.

The Central Bank said the Sri Lankan economy is poised for stronger performance with the recovery observed in the external sector, sustained momentum in construction and manufacturing sectors and with monetary aggregates performing as expected, and inflation remaining low and stable.

The inflation remained low in single digits reaching 4.2 percent in March this year. Although some price escalations are expected due to supply disruptions brought by drought conditions, inflation is expected to remain at mid-single digits throughout the year supported by favorable inflation expectations, and subdued demand conditions.

In the external sector, inflows on account of workers' remittances recorded a significant increase in February 2014 while earnings from tourism also increased during the first quarter 2014.

Credit obtained by the public corporations declined further in February due to net repayments by the CPC and CEB during the February.

Gross official reserves are estimated to be around US$ 8.0 billion as at end February 2014,and the reserve level is expected to further improve with the proceeds of the US$ 500 million sovereign bond issuance in April 2014.

Continued fiscal consolidation, together with the sovereign bond issuance, is expected to ease public sector's reliance on bank financing in the coming months, the Bank said. The Monetary Board was of the view that the current monetary policy stance is appropriate, and therefore, decided to maintain the policy rates unchanged, the Central said.

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