Central Bank Maintains Policy Interest Rates at Current Levels
By Rajiesh Seetharam
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 24 November 2021, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 5.00 per cent and 6.00 per cent, respectively. Bank rate would remain at 9%, and Statutory Reserve Ratio (SRR) would remain at 4%.
“Supply side disruptions, removal of domestic price controls and upward adjustments to several administratively determined prices to reflect the rising global energy and other commodity prices along with the gradual firming of aggregate demand conditions, have pushed inflation above the targeted levels recently. A further acceleration of headline inflation is possible in the immediate future, although such movements are expected to be transitory.
The monetary policy measures already taken by the Central Bank will help curbing excessive demand pressures and preventing the buildup of adverse inflation expectations. Under these circumstances, the Monetary Board decided to keep the interest rates unchanged,” a CBSL statement said. CBSL Director Economic Research Dr. Chandranath Amarasekera noted that Sri Lanka recorded a growth of 8% in the first half of the year.
Most of the Economic activities have returned to pre pandemic level. Real GDP growth for 2021 is expected as 5%, however he claimed there are risk factors with COVID-19 cases increasing globally. Gross official reserves were estimated at US dollars 2.3 billion by end October 2021. This, however, does not include the bilateral currency swap facility with the People’s Bank of China (PBoC) of CNY 10 billion (approximately USD 1.5 billion). With measures taken by the Government and CBSL to attract forex inflows, Amarasekera noted that CBSL expects to end the year with USD 3.5 billion in reserves.