COLOMBO: Sri Lanka’s central bank kept interest rates unchanged on Friday ( Sep 27 ) in line with expectations, citing domestic and global uncertainties, but said inflation was likely to remain low and the economy was doing much better than initially expected.
The Standing Deposit Facility Rate and Standing Lending Facility Rate were maintained by the Central Bank of Sri Lanka ( CBSL ) at 8.25 per cent and 9.25 per cent. The island’s fresh president’s poll helped it escape its worst economic crisis in decades.
Governor P Nandalal Weerasinghe said,” We now see solid proof that the business will be growing well over 3 %, but it is too quick for us to work a specific figure,” adding that CBSL may not make any changes to its 20-year GDP estimates.
However, the state may provide an updated development see when the expenditure is presented by the innovative finance minister, he added.
According to CBSL,” the Board observed that inflation is likely to remain well below the target of 5 % over the next few rooms, with the potential for recession to occur in the near future as a result of changes to the district determined costs and easing of offer problems,” according to a statement from earlier.
Weerasinghe predicted that as of end of September, prices may fall below the lower ending of the target inflation range of 3 to 7 percent for two straight quarters, necessitating the CBSL to explain the reasons to the state as per law.
In July, CBSL cut costs by 25 basis points as part of an easing pattern that has seen costs drop by a total of 7.25 percentage points since June 2023, half reversing the 10.50 percentage details of rises following the financial crisis.
” Progress and credit growth are now at respectable rates. CBSL would want to see that price increase first, according to Udeeshan Jonas, plan head at Colombo-based capital research agency CAL, given that federal stocks have increased as a result of political uncertainty.
According to Jonas, inflation could increase in the second half of the year, while fiscal easing, which the president is anticipated to announce in the upcoming budget, could have an impact on prices.
Last Saturday, Sri Lanka elected Marxist-leaning Anura Kumara Dissanayake as president, drawn by his pledges to slash taxes, fight corruption, and reduce the cost of living.
Weerasinghe claimed to have discussed fiscal issues with the new president, but no specific discussions have yet taken place.
Dissanayake dissolved parliament on Tuesday, and he plans to win more seats in the 225-member house through a Nov. 14 general election. His coalition only managed three seats in the parliament that was chosen in August 2020.
He stated on Wednesday that he intends to start discussions with the International Monetary Fund ( IMF) right away to advance the nation’s$ 2.9 billion bailout program.
In an email sent late on Thursday, IMF Senior Mission Chief for Sri Lanka Peter Breuer stated that the organization was reportedly in talks with the country’s new president.  ,