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July 11, 2012 (LBO) - Sri Lanka is holding its key interest rates at which money is injected into the economy at 9.75 percent amid rising inflation, though credit and money supply growth is starting to slow, the Central Bank said.
The monetary authority said Sri Lanka had met end-June targets under an International Monetary Fund program.
The only serious target (performance criterion) for the last tranche of 450 million US dollars under a 2.5 billion US dollar bailout was an end month level for foreign reserves.
Sri Lanka had reserves of 5,815 million US dollar by end May, the Central Bank said.
Sri Lanka's inflation rose 9.3 percent in June 2012 from a year earlier, with rupee depreciating sharply from 110 to 133 levels in the period, pressured from high credit growth and sterilized foreign exchange sales.
Loans grew steeply last year as credit to government rose 44.7 percent up to May and credit to state enterprises rose 107.7 percent mainly due to loans taken to manipulate tariffs by energy utilities.
The Central Bank also printed more than 200 billion rupees to inject rupee reserves in to the banking system, driving credit, the trade deficit and current account deficit of the balance of payments to unsustainable levels.
In February energy prices were raised, the exchange partially floated to reduce the need to sterilized interventions, more credit, more domestic demand and further foreign reserve losses.
The Central Bank said growth in broad money defined as M2b fell to 20.9 percent in May 2012, from 29.9 percent in April 2012.
Private sector credit fell from a peak of 35.2 percent in March 2012 to 33.5 percent in May 2012.
"In the meantime, provisional data shows that the growth of import expenditure has been shrinking sharply in the first five months of the year, thereby narrowing the trade deficit, compared to the high levels recorded in 2011," the central bank said in its July monetary policy statement.
"With weaker global demand, most international commodity prices are also on a declining trend, which should, on a net basis, further ease pressure on the country’s imports this year, although the continuing sluggish global economic recovery may affect export earnings as well."
Sri Lanka however was holding policy reverse repo rate at 9.75 percent and the repo rate at which excess liquidity at 7.75 percent.
http://www.lbo.lk/fullstory.php?nid=82760238
The monetary authority said Sri Lanka had met end-June targets under an International Monetary Fund program.
The only serious target (performance criterion) for the last tranche of 450 million US dollars under a 2.5 billion US dollar bailout was an end month level for foreign reserves.
Sri Lanka had reserves of 5,815 million US dollar by end May, the Central Bank said.
Sri Lanka's inflation rose 9.3 percent in June 2012 from a year earlier, with rupee depreciating sharply from 110 to 133 levels in the period, pressured from high credit growth and sterilized foreign exchange sales.
Loans grew steeply last year as credit to government rose 44.7 percent up to May and credit to state enterprises rose 107.7 percent mainly due to loans taken to manipulate tariffs by energy utilities.
The Central Bank also printed more than 200 billion rupees to inject rupee reserves in to the banking system, driving credit, the trade deficit and current account deficit of the balance of payments to unsustainable levels.
In February energy prices were raised, the exchange partially floated to reduce the need to sterilized interventions, more credit, more domestic demand and further foreign reserve losses.
The Central Bank said growth in broad money defined as M2b fell to 20.9 percent in May 2012, from 29.9 percent in April 2012.
Private sector credit fell from a peak of 35.2 percent in March 2012 to 33.5 percent in May 2012.
"In the meantime, provisional data shows that the growth of import expenditure has been shrinking sharply in the first five months of the year, thereby narrowing the trade deficit, compared to the high levels recorded in 2011," the central bank said in its July monetary policy statement.
"With weaker global demand, most international commodity prices are also on a declining trend, which should, on a net basis, further ease pressure on the country’s imports this year, although the continuing sluggish global economic recovery may affect export earnings as well."
Sri Lanka however was holding policy reverse repo rate at 9.75 percent and the repo rate at which excess liquidity at 7.75 percent.
http://www.lbo.lk/fullstory.php?nid=82760238
