Sri Lanka Policy Rates Unchanged as Inflation Remains Low and Credit Flows Picking Up

19th October 2010, www.lankabusinessonline.com

Sri Lanka's central bank will maintain benchmark interest rates at current levels as inflation remains low, credit flows are picking up and economic growth strong, a statement said.

The Monetary Board of the bank at Monday's meeting decided to maintain the Repurchase rate and the Reverse Repurchase rate at 7.25 percent and 9.00 percent, it said.

"Economic growth remains robust and broad based with all sectors contributing to the expansion of output," it said.

"Credit flows continue to rebound with credit to the private sector from commercial banks growing on a year-on-year basis by 12.8 percent in August 2010, further reinforcing the growth prospects."

At the same time, the bank said, year-on-year growth in broad money remains moderate at 13.9 percent in August.

Inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index, increased in September to 5.8 percent from 05 percent in August.

"However, inflation is expected to remain subdued over the coming months," the central bank said.

The successful issue of a 10-year international sovereign bond on 27 September at a comparatively lower coupon rate of 6.25 percent and which was oversubscribed six times "reflects the improved investor confidence in the economy".

Gross international reserves further increased with the receipt of the fifth tranche of an International Monetary Fund stand-by loan and the proceeds of the international sovereign bond.