The Central Bank has said that Sri Lanka has cut its benchmark interest rate, a move aimed at encouraging post-war economic growth across various sectors.
The Central Bank of Sri Lanka cut its key repurchase rate by 25 basis points to 7.0 per cent, while the reverse repurchase rate was reduced by 50 basis points to 8.0 per cent.
The bank said the country’s budget deficit was expected to be well on target at 6.8 per cent of GDP this year, down from 8.0 per cent in 2010.
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“The government remains committed to securing a budget deficit of 6.8 per cent of GDP in 2011 with current indications showing that such deficit target is likely to be achieved,” the bank said in a statement.
The favourable macroeconomic environment provided the required space and comfort for new and wider investments to be made in all sectors of the economy, including new growth areas, without fuelling undue inflationary pressures.
“A reasonable relaxation of the Central Bank’s monetary policy stance would be appropriate and timely.
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Such policy stance would result in a further reduction in market interest rates, which would reflect the lower risk premia that is expected to prevail in the period ahead, without increasing the inflationary pressures in the economy,” the bank added.
Sri Lanka’s economy was estimated to have grown at eight per cent last year, compared to an expansion of 3.5 per cent in 2009.