Sri Lanka holds rates as it awaits crucial IMF deal

Article content material

COLOMBO — Sri Lanka’s central financial institution held rates of interest regular for a 3rd straight assembly on Wednesday, as extensively anticipated, saying the prevailing tight financial stance is essential to taming still-high inflation and restoring financial stability.

The island nation of twenty-two million folks, which is attempting to clinch a $2.9 billion IMF funding package deal, is within the grip of its worst financial disaster since independence from Britain in 1948.

Article content material

The Standing Lending Facility fee was held regular at 15.50% whereas the Standing Deposit Facility Charge was stored unchanged at 14.50%, remaining at their highest ranges since August, 2001.

Commercial 2

Article content material

“The Board … was of the view that the upkeep of the prevailing tight financial coverage stance is crucial to make sure that financial circumstances stay sufficiently tight to rein in inflationary pressures,” the Central Financial institution of Sri Lanka (CBSL) mentioned in a press release.

“Market charges are adjusting as anticipated, so there was no want to the touch coverage fee,” mentioned Udeeshan Jonas, chief strategist at CAL Group.

The CBSL had elevated charges by an enormous 950 foundation factors between August 2021 to July 2022 to combat runaway inflation. Policymakers are nonetheless grappling with challenges on a number of fronts together with a scarcity of international forex, a collapse within the rupee, a steep recession and slowing world development.

The central financial institution mentioned tight financial and monetary insurance policies will assist carry down inflation to desired ranges by the top of 2023 and restore value and financial stability over the medium time period.

Commercial 3

Article content material

After hitting an annual peak of 68.9% in September with meals inflation climbing to 93.7%, shopper inflation moderated to 57.2% in December.


The exterior sector stays resilient regardless of heightened challenges, and the outlook stays optimistic with the anticipated enhancements linked to “financing assurances” from collectors, the CBSL assertion mentioned.

Sri Lanka is dedicated to assembly all its debt repayments and is hoping to finish debt restructuring negotiations within the subsequent six months, central financial institution chief P. Nandalal Weerasinghe mentioned on Tuesday.

India instructed the IMF final week that it strongly helps Sri Lanka’s debt restructuring plan, an important endorsement for Colombo because it tries to safe the four-year $2.9 billion program with the worldwide lender and bolster its tattered funds.

Commercial 4

Article content material

“It is vital CBSL is obvious of their communications about home debt restructuring, regardless of the eventual choice, since that’s the large driver of the chance premia connected to market charges,” mentioned Thilina Panduwawala, head of analysis at Colombo-based Frontier Analysis.


Market rates of interest have begun to maneuver down and are anticipated to ease additional, the central financial institution mentioned.

Rates of interest on three-month authorities securities have eased to about 30% from a peak of round 32% earlier this month.

“They might solely begin coverage fee revisions as soon as inflation makes a considerable flip and the IMF deal is thru,” mentioned CAL Group’s Jonas. (Enhancing by Shri Navaratnam)


Postmedia is dedicated to sustaining a vigorous however civil discussion board for dialogue and encourage all readers to share their views on our articles. Feedback could take as much as an hour for moderation earlier than showing on the positioning. We ask you to maintain your feedback related and respectful. We now have enabled electronic mail notifications—you’ll now obtain an electronic mail if you happen to obtain a reply to your remark, there may be an replace to a remark thread you observe or if a person you observe feedback. Go to our Neighborhood Tips for extra data and particulars on the right way to modify your electronic mail settings.

#Sri #Lanka institution #holds #charges #awaits #essential #IMF #deal

Leave a Comment