Sri Lanka’s Central Bank likely to leave key interest rates unchanged, report
Sri Lanka’s Central Bank is expected to leave its key interest rates unchanged on Thursday, a Reuters poll showed, after cutting them in May to support the economy as tourism and investment plummeted in the wake of Easter Sunday bombings, the Reuters news agency has reported.
Reuters has stated that economic growth is expected to slow to 3% or less this year, according to the Central Bank, following the attacks, which killed more than 250 people. Militant group Islamic State has claimed responsibility.
A Reuters poll has predicted growth would slump to its lowest in nearly two decades this year.
Ten out of 12 economists surveyed by Reuters have expected the Central Bank of Sri Lanka to keep both its standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) steady at 7.50% and 8.50%, respectively.
Two analysts have expected both rates to be cut by 25 basis points (bps).
All of the analysts predicted the statutory reserve ratio (SRR) would be kept at 5.00%.
“You need to allow time to see the impact of previous policy rate cut,” Dimantha Mathew, Research Head at First Capital Holdings has told Reuters. “Market rates have come down somewhat. But since banks’ non-performing loans (NPLs) are also high, banks do not want to rush and reduce their lending rates. So lending is slow and it will take another 3-4 months for market rates to come down.”
Some analysts have noted that the Central Bank will announce steps to boost lending.
However, pressure on the rupee currency has eased after the country sold US$2 billion of sovereign bonds last month.
OSL take:
As summed up in the Reuters report, despite the negative impact suffered following the Easter Sunday attacks, Sri Lanka’s economic policies would help the country bounce back to normalcy at a quicker pace. With pressure on the rupee currency easing after the sale of US$2 billion of sovereign bonds last month, Sri Lanka’s economy is definitely on the growth path with several key economic sectors in the country also entering the growth path. Given the current economic indications, especially the oversubscribed sovereign bond issue, foreign businesses/investors could confidently explore business/investment opportunities in Sri Lanka.
| Article Code : | VBS/AT/11072019/Z_5 |