Sri Lanka maintains policy rates as fiscal sector records notable improvements in 2017

Sri Lanka’s Central Bank releasing the monetary policy review on Thursday said environment it has decided to maintain current policy interest rates as the fiscal sector recorded notable improvements in 2017, particularly due to increased revenue collection.

Accordingly, the Monetary Board has decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.25 percent and 8.75 percent, respectively while the Statutory Reserve Ratio remains at 7.50 percent.

However, the Central Bank said it will continue to cautiously monitor the developments in the economy and take necessary policy actions, if warranted.

Sri Lanka’s economy in the third quarter of 2017 grew by 3.3 percent, lower than the projected growth as the Agriculture sector continued to record a negative growth on account of weather related disruptions.

Headline inflation decelerated in November 2017 as expected, but still remains at an elevated level, reflecting the impact of higher domestic food prices, the Central Bank said.

Export earnings continued its growth momentum registering double digit growth for the fourth consecutive month while the trade deficit widened during the first ten months of the year, largely on account of the notable increase in import expenditure.

Although near term growth prospects remain subdued, it is anticipated that the economy would recover in 2018 due to continuous surge in exports and investments induced by foreign direct investments.

In view of the developments, the Monetary Board has decided to maintain the current monetary policy stance as it is appropriate.


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