By Central Bank News
The Central Bank of Sri Lanka kept its benchmark repurchase rate unchanged at 7.75 percent, as expected, saying past efforts to curb high demand for imports and credit are starting to pay off.
“Reflecting the impact of the policy measures taken, credit obtained by the private sector has decelerated since the second quarter of 2012, and the policy measures in place are expected to help ensure that the growth of credit will be within the desired level at year end,” the central bank said in a statement.
Average monthly credit expansion decelerated to some 27 billion rupees in the second quarter, down from an average expansion of about 52 billion, the central bank said, adding that the amount of credit was still sufficient to ensure reasonably robust economic activity.
Sri Lanka’s economy expanded by 6.4 percent in the second quarter, down from 7.9 percent in the first quarter. Inflation rose to 9.5 percent in August, down from a 3-1/2 year high of 9.8 percent in July, but the central bank said policies adopted by authorities are expected to help contain inflation to single digits.
The bank has raised interest rates twice this year, by a total of 75 basis points.
Sri Lanka’s central bank said the growth of imports had decelerated considerably since April, outpacing the decline in export growth, resulting an improve trade balance.
In addition, growing positive investor sentiment has resulted in net inflows of $229 million to the Colombo stock exchange while proceeds of a bond issue in July helped boost gross official reserves to over $7 billion by end-July.
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