Central Bank keeps key rates on hold
The Monetary Board of t he Central Bank of Sri Lanka (CBSL) has decided to hold policy rates at current levels of 6.5 percent and 8 percent for the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) respectively.
“The Monetary Board is of the view that the deceleration of growth in credit to the private sector is temporary, and going forward, private sector credit is likely to rebound from the second quarter of the year, supported by declining market lending rates, sufficient liquidity levels and increased demand f or exports from the advanced economies,” the CBSL’s March monetary policy review noted.
According to CBSL statistics, broad money (M2b) expanded by 16 percent in January 2014, primarily due to higher net credit to the government (NCG) as credit flows to the private sector and public corporations contracted. NCG from the banking system increased by around Rs. 68.3 billion in January 2014, but is expected to decline in February with the utilisation of proceeds from the sovereign bond. Credit to the private sector by commercial banks moderated, growing only by 5.2 per cent in January 2014 in comparison to 7.5 per cent in December 2013, largely due to the settlement of short term advances by corporates during the month as well as the decline seen in pawning and trade related credit. GDP growth during the final quarter of 2013 was recorded at 8.2 percent reflecting a surge in the performance of the agriculture and industry sectors while service sector growth indicated some moderation.
During the year, the industry sector showed a robust growth of 9.9 percent, while the agriculture and services sectors recorded growth rates of 4.7 percent and 6.4 percent.
Substantiating the deceleration seen in consumer price inflation during the year, the GDP deflator for 2013 recorded 6.7 percent, declining from 8.9 percent in 2012.