CB Keeps Policy Rates Unchanged

Speaking to Bloomberg TV, Central Bank Governor Ajith Nivard Cabraal said the economic growth has been “pretty strong”.During the first half, the Sri Lankan economy grew by 7.7 percent on average and the Central Bank targets the economy to grow by 7.8 percent in 2014.Cabraal further said that the easing global crude prices which have fallen by as much as 40 percent so far this year, has buttressed the external sector and the increasing hydropower generation, on account of favourable weather conditions in recent times, have stood better for the economy.
Cabraal said the markets have “remained calm” so far this year.

Sri Lanka’s headline inflation has been on the decline for the fourth consecutive month i n November to 1.5 percent Yearon-Year (YoY) fearing a possible deflation.Some economists have warned that containing inflation largely through administrative price revisions could create a situation of ‘lowflation,’ similar to what is current seen in the European Union.Sri Lanka’s energy prices are all administered and, in the most recent times t he government resorted to set maximum prices for necessities such as rice, largely in view of the forthcoming presidential election.

However it was only recently the senior economist and Pathfinder Foundation Deputy Chairman Dr. Indrajith Coomaraswamy said people could not be lured through hand outs and goodies as they have now become much more aspirational.He was of the view that any party that fails to satisfy those demands will become a failure in this new economic order set in the post-war period.

Meanwhile, private sector credit growth has picked up 5.1 percent YoY in October, third consecutive month, largely on accounts of the slight recovery in the pawning loans.In absolute terms, total credit to the private sector was Rs. 42 billion out of which Rs. 36 billion was disbursed by domestic banking units of commercial banks.As a result, the total outstanding in the banking system was Rs.2,623.81 billion, up 3.5 percent for the first ten months.

The average growth of broad money during the first ten months of this year was 13.3 percent.Meanwhile Cabraal commenting on the current political uncertainty created through early elections called by the incumbent President Mahinda Rajapaksa said, the president had called a snap election for a fresh mandate at the “right time” and it is demonstrated through how the markets have reacted so far.

Further, he told that Sri Lanka is now a “matured democracy” and there would unlikely to be any change in the January 8 polls.