Sept. 22 (Bloomberg) -- Sri Lanka’s central bank kept both of its benchmark interest rates unchanged for the first time in three months, judging cuts in July and August are sufficient to support economic growth.
The Central Bank of Sri Lanka left the reverse repurchase rate at 9 percent, the lowest level since November 2004, and the repurchase rate at 7.25 percent, according to a statement on the Colombo-based bank’s website yesterday.
Governor Ajith Nivard Cabraal has slashed the reverse repurchase rate by three-quarters of a percentage point since early July, taking advantage of low inflation to bolster the economy. Consumer prices in Colombo rose 5 percent in August from a year earlier, which is less than half the average rate of the five years through 2009.
“More rate cuts are not required at this time as loan demand is picking up and the growth momentum is intact,” Sanjeewa Fernando, an analyst at CT Smith Stockbrokers Pvt. in Colombo, said before the decision.
Cabraal told Bloomberg News on Sept. 7 that he expects a “faster upturn” in credit growth in the coming months.
Sri Lanka’s consumer and corporate credit grew 8.9 percent to 1.29 trillion rupees ($11.5 billion) in July from a year earlier, after expanding 6.2 percent in June, according to the central bank.
Contrasting Stance
The Sri Lankan central bank’s monetary stance contrasts with those in India, Malaysia and Thailand, where policy makers have raised borrowing costs this year to check inflation or prevent asset bubbles.
Gross domestic product rose 8.5 percent in the three months ended June 30 from a year earlier, the most since 2002, the statistics department said Sept. 16.
Sri Lanka’s $42 billion economy may grow as much as 8 percent in 2010, the central bank said yesterday, compared with an earlier forecast for a 7 percent expansion.
“Credit flows to the private sector are expected to increase further in the period ahead,” the bank said.
President Mahinda Rajapaksa’s government ended the island’s 26-year civil war by defeating the Liberation Tigers of Tamil Eelam in May 2009.
The prospect of peace and faster economic growth are attracting foreign companies to the island nation.
Mphasis Ltd., an Indian software developer controlled by Hewlett-Packard Co., may hire as many as 5,000 people in Sri Lanka in three years, Chief Executive Officer Balu Ganesh Ayyar said in Colombo Sept. 6.
Emirates Telecommunications Corp., the United Arab Emirates’ biggest phone company, on July 20 announced plans to spend as much as $163 million in six months to expand its network in Sri Lanka.
To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net
source - noir.bloomberg.com
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