AGL 40.39 Increased By ▲ 0.38 (0.95%)
AIRLINK 126.80 Decreased By ▼ -1.19 (-0.93%)
BOP 6.60 No Change ▼ 0.00 (0%)
CNERGY 4.51 Decreased By ▼ -0.09 (-1.96%)
DCL 8.52 Increased By ▲ 0.04 (0.47%)
DFML 41.75 Increased By ▲ 0.27 (0.65%)
DGKC 86.90 Increased By ▲ 0.32 (0.37%)
FCCL 32.30 Increased By ▲ 0.16 (0.5%)
FFBL 65.00 Decreased By ▼ -0.42 (-0.64%)
FFL 10.15 Decreased By ▼ -0.10 (-0.98%)
HUBC 109.58 Decreased By ▼ -0.91 (-0.82%)
HUMNL 14.60 Decreased By ▼ -0.15 (-1.02%)
KEL 5.12 Decreased By ▼ -0.01 (-0.19%)
KOSM 7.55 Increased By ▲ 0.43 (6.04%)
MLCF 41.30 Decreased By ▼ -0.35 (-0.84%)
NBP 59.53 Decreased By ▼ -0.56 (-0.93%)
OGDC 194.99 Increased By ▲ 0.30 (0.15%)
PAEL 28.27 Increased By ▲ 0.32 (1.14%)
PIBTL 7.77 Decreased By ▼ -0.23 (-2.88%)
PPL 152.49 Increased By ▲ 1.32 (0.87%)
PRL 26.65 Decreased By ▼ -0.23 (-0.86%)
PTC 16.10 Increased By ▲ 0.10 (0.63%)
SEARL 79.06 Increased By ▲ 0.86 (1.1%)
TELE 7.47 Increased By ▲ 0.08 (1.08%)
TOMCL 35.49 Decreased By ▼ -0.18 (-0.5%)
TPLP 8.30 Increased By ▲ 0.39 (4.93%)
TREET 16.05 Increased By ▲ 0.16 (1.01%)
TRG 53.00 Increased By ▲ 0.24 (0.45%)
UNITY 26.75 Increased By ▲ 0.20 (0.75%)
WTL 1.25 Decreased By ▼ -0.02 (-1.57%)
BR100 9,892 Decreased By -28 (-0.28%)
BR30 30,712 Decreased By -39.5 (-0.13%)
KSE100 93,318 Increased By 93.1 (0.1%)
KSE30 28,924 Increased By 39 (0.13%)

COLOMBO: Sri Lanka’s central bank is expected to further loosen monetary policy on Thursday, albeit by a smaller degree than previously, as it looks to use the rapid decline in inflation as an opportunity to foster growth and put the economy firmly on a path of recovery.

The median estimate in a Reuters poll of 15 economists and analysts predicts a 100-basis-point cut in both the Standing Deposit Facility Rate and the Standing Lending Facility rate, taking them to 10% and 11%, respectively.

The Central Bank of Sri Lanka (CBSL) has already reduced rates by 450 bps in two moves over June and July.

Sri Lanka’s economy was crushed last year under the worst financial crisis in over seven decades with inflation sky-rocketing and foreign exchange reserves falling to record lows, severely stunting the island nation’s ability to import essential commodities.

CBSL responded by hiking rates by a total 1050 bps until March to contain inflation and rebuild its dollar kitty.

Having secured a $2.9 billion rescue package from the International Monetary Fund (IMF) in March, the Sri Lankan economy has gradually stabilised.

Inflation measured in the key Colombo Consumer Price Index eased to 6.3% in July from a high of 69% last September. Inflation was at 12% in June.

The steep reduction in inflation is creating space for further easing, analysts said, although some predicted the apex bank would wait and watch for the time being.

An additional rate cut on Thursday would help close the gap between policy rates and interest rates of short-term government securities, some analysts added.

“Despite earlier cuts there is a gap of about 300 basis points, which needs to reduce for lending rates to come down,” said Visaahan Arumainayagam, analyst for Colombo-based broking firm Asha Securities.

The decision will be announced via a statement at 7:30 a.m. (0200 GMT) on Thursday.

A shift of focus to improving growth is needed after the economy contracted 7.8% in 2022 and is projected to shrink 2% this year, economists said.

An IMF team will arrive in Colombo in mid-September for the first review of the IMF programme and Sri Lanka is also working to wrap up debt restructuring talks by the end of next month.

Comments

Comments are closed.