Apr 08, Colombo: Sri Lanka's Central Bank releasing the monetary policy review on Monday said given the current and expected conditions in the domestic economy and the financial market, the Monetary Board was of the view that the continuation of the current monetary policy stance is appropriate.
Accordingly, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 percent and 9.00 percent, respectively.
The Board said it arrived at this decision following a careful analysis of current and expected developments in the domestic economy, the financial market as well as the developments in the global economy, with the broad aim of stabilizing inflation at mid-single digit levels in the medium term to enable the economy to reach its potential.
Despite the recent uptick in inflation, inflation is expected to remain in mid-single digit levels within the desired range of 4-6 percent in 2019 and beyond.
External sector performance continued to improve so far in 2019 with the deficit in the merchandise trade account contracting in the first two months as the exports continued to grow and imports declined in response to the policy measures adopted by the Central Bank and the government in 2018 to curtail non-essential imports.
Further, tourist arrivals increased in the first quarter of 2019 improving the associated earnings, although a moderation in workers' remittances was observed during the first two months of the year.
These developments, along with exporter conversions and seasonal inflow of remittances, led to an appreciation of the Sri Lankan rupee against the US dollar and other major currencies.
Meanwhile, the receipt of proceeds from the issuance of the International Sovereign Bonds (ISB) helped increase gross official reserves to an estimated US dollars 7.6 billion by end March 2019, providing an import cover of 4.2 months
The Sri Lankan economy recorded a modest growth of 3.2 percent during 2018, compared to the revised growth of 3.4 percent in 2017.