By Devan Daniel
The Monetary Board of the Central Bank has decided to keep policy rates steady with inflation falling and private sector credit picking up.
The Central Bank said policy interest rates would remain unchanged at 7.5 percent and 9.75 perecent. These rates apply to overnight placement of excess funds of commercial banks (repurchase rate) with the Central Bank and borrowings (reverse repurchase rate) form the Central Bank respectively.
"Inflation as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI) declined for the third consecutive month, reaching 5.3 percent in May while the annual average rate of inflation increased marginally to 3.6 percent. Inflationary pressures in the domestic economy remain subdued, benefitting from dampened commodity prices in the international market and increased domestic agricultural output," the Central Bank said in its Monetary Policy Review for June.
The general level of prices increased 1.6 percent in May while the rate at which prices increase, or inflation, continued to decline, reaching 5.3 percent after reaching 6.9 percent in February.
A senior official of the Department of Census and Statistics said overall prices of goods represented in the CCPI increased 1.6 percent from April to May due to price-increases of gas, flour, vegetables and fish.
"Growth in the money supply continues to moderate while accommodating an expansion in credit to the private sector. Credit extended to the private sector by the commercial banks, which contracted during much of 2009, has recorded a positive growth since March 2010. Expansion in credit obtained by the private sector indicates a gradual pick-up in economic activity, and this expansion is expected to gather momentum, particularly in view of the prevailing supportive monetary conditions," the Central Bank said.
According to latest data from the Central Bank (Weekly Economic Indicators as at June 11), credit stock to the private sector increased a marginal 0.1 percent in March 2010 to Rs. 1,235.4 billion from Rs. 1,234 billion in March 2009. Credit from the domestic banking sector increased 0.5 percent to Rs. 1,084.3 billion. Foreign sources accounted for credit amounting to Rs. 150.8 billion, a 2.4 percent decline from the previous year.
Net credit to the government declined by 6.9 percent to Rs. 655.2 billion from Rs. 704 billion a year ago. Credit to corporations increased by 84 percent to 96.9 billion from Rs. 52.6 billion.
According to the bank, total lending of the domestic financial sector would have to more than double by 2014 if the target of reaching a per capita income of US$ 4,000 was to become a reality.
"Indicators of external sector performance point to encouraging developments. Exports have recorded a healthy growth for the first quarter of 2010. Imports have also increased in line with the recovery in economic activity. The recent relaxation of selected import tariff would provide additional impetus to the economic recovery underway. Workers’ remittances, which have recorded a growth of 14.1 per cent, year-on-year, for the first quarter of 2010, meanwhile, continue to cushion the current account. Further, the Central Bank continues to be a net buyer in the domestic foreign exchange market. Reflecting these trends, the foreign reserves of the country remain at comfortable levels," the Central Bank said.
Sri Lanka’s trade deficit expanded 119.7 percent during the first three months of the year as imports grew faster than export earnings with garments declining 14.9 percent and the petroleum bill increasing 107 percent, according to Central Bank data.
Although private remittances increased during this period compared to last year, the overall balance of payments recorded a deficit. Last year the balance of payments recording a surplus as import expenditure fell faster than export earnings due to the global financial crisis.
Export earnings grew 7.1 percent for the first three months of the year to US$ 1,763.6 million from US$ 1,647.4 million during the corresponding period of the previous year. Tea export earnings grew 26.2 percent to US$ 305.6 million. Apparel export earnings fell 14.9 percent to US$ 703.2 percent.
Import expenditure grew 39.5 percent to US$ 3,224.9 million from US$ 2,312.5 million the previous year. Import expenditure on food items grew by 54.4 percent to US$ 521.5 million while petroleum imports increased 107 percent to US$ 752 million.
The trade deficit expanded 119.7 percent to US$ 1,461.3 million from US$ 665.1 million the previous year. Remittances grew 14.1 percent to US$ 890.6 million from US$ 780.7 million. Last year remittances were enough to cover the trade deficit, but this year despite an improvement in inflows, higher import growth resulted in a higher deficit.
Foreign currency reserves held by the Central Bank amounted to US$ 5,192 million as at end March, enough to finance imports for five and a half months.
source - www.island.lk
No comments:
Post a Comment