Sri Lanka pol­icy rates steady as in­fla­tion rise

The Pak Banker - - Company& -

COLOMBO: Sri Lanka's cen­tral bank said it was hold­ing rates steady at 7.25 and 9.00 per­cent as in­fla­tion rose and credit growth picked up amid a "sus­tained re­cov­ery" in eco­nomic ac­tiv­i­ties.

Sri Lanka has one of the high­est pol­icy rates in the world and this year's in­fla­tion at 7.0 per­cent by Novem­ber is low by his­tor­i­cal lev­els of in­fla­tion gen­er­ated by the Cen­tral Bank. But the coun­try's cen­tral bank has gen­er­ated less in­fla­tion than Pak­istan where in­fla­tion is run­ning at above 15 per­cent.

"The re­cent mon­e­tary eas­ing by the Cen­tral Bank has helped im­prove do­mes­tic credit con­di­tions, and thereby sup­ported the sus­tained re­cov­ery in do­mes­tic eco­nomic ac­tiv­ity," the Cen­tral Bank said in its De­cem­ber mon­e­tary pol­icy re­view.

"The ex­ter­nal sec­tor too has recorded en­cour­ag­ing per­for­mance in re­cent months.

"While do­mes­tic eco­nomic ac­tiv­ity has re­bounded strongly this year, it is ex­pected that this growth mo­men­tum would con­tinue into the next year too, sup­ported by the re­cov­ery in the global econ­omy."

The cen­tral bank said the in­fla­tion was seen in the Colombo Con­sumer Price In­dex mostly as in­creases in food prices.

Sri Lanka has re­stric­tive poli­cies on food which makes prices more volatile than the rest of the world de­spite hun­dreds of mil­lions of dol­lars be­ing given as fer­til­izer sub­si­dies.

The govern­ment re­cently slapped price con­trols on rice af­ter go­ing on a cam­paign against wheat con­sump­tion. The coun­try's broad money was 'within tar­geted lev­els" de­spite a pick-up in credit with lower credit to the state and a de­cline in net for­eign as­sets of the bank­ing sys­tem, the Cen­tral Bank said. -PB News

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