Aug 19, Colombo: Sri Lanka’s economy is poised to grow by about 5 percent this year, according to the Governor of the Central Bank of Sri Lanka, Prof. W.D. Lakshman.

Speaking at the release of the sixth Monetary Policy Review of the Central Bank of Sri Lanka this year, the Governor said the Central Bank of Sri Lanka had forecast five percent economic growth for this year and this growth is supported by notable fiscal stimulus as well as extraordinary monetary concessions over the past year and a half.

He said that it was due to those relief measures that this growth was possible despite the threat of the Covid-19 epidemic.

He said however this process of supporting the economic growth and high credit expansion, has had some side effects, especially in the foreign sector and in general, emergence of macroeconomic imbalances have been observed.

Prof. Lakshman said the effects were exacerbated by the weaknesses in the external sector including widening of the trade deficit, anomalies between domestic and foreign interest rates, anomalies in exchange rates on domestic and foreign resources, deviations in formal and informal markets exchange rates from the official exchange rate.

The Governor of the Central Bank said that the adverse speculations (adverse comments / exchanges) in the foreign exchange market also had adverse impacts.

He said that although the expeditious vaccination drive to control the Covid-19 epidemic was encouraging, the tourism industry was not showing a rapid recovery as previously expected as global conditions not appear to indicate a revival in the tourism sector.

In addition, there has been a slowdown of workers’ remittances inflows that are made through formal channels.

The governor said the monetary review is attempting to address these imbalances.

The Monetary Board of the Central Bank today decided to increase the interest rates tightening the monetary policy.