- POSTED: 02 Jan 2014 15:00
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Sri Lanka's central bank Thursday cut a key lending rate by 50 basis points to 8.0 per cent after inflation eased to its lowest level in nearly two years and as the economy shows signs of sustained growth.
COLOMBO: Sri Lanka's central bank Thursday cut a key lending rate by 50 basis points to 8.0 percent after inflation eased to its lowest level in nearly two years and as the economy shows signs of sustained growth.
The move by the Monetary Board of the Central Bank of Sri Lanka represents the fourth consecutive reduction since December 2012. The deposit rate was kept at 6.5 per cent.
The bank said it expected the island's economy grew 7.2 per cent in 2013, up from 6.4 per cent in 2012 after announcing last week that inflation had hit a 22-month low of 4.7 per cent.
"Economic growth is expected to accelerate further during the new year, while inflation is projected to remain in mid-single digits," the bank added in a statement.
It cut the two rates by 50 basis points in both October and May, while reducing them by 25 points in December 2012.
The bank has announced a slew of recent figures indicating a pick-up in the economy, which recorded strong growth in the two years after the end of bloody civil war in 2009, but has dipped since.
It forecast overseas trade will continue to rebound as developed nations see improvements in their economies, while it also said the country's trade deficit had narrowed to US$7.8 billion by the end of 2013.
"The external sector is also envisaged to improve further, with the expected recovery in advanced economies and structural measures adopted domestically to strengthen the sector," the bank said.
The country's balance of payments also improved to record a surplus of US$700 million in calendar 2013 compared to a modest surplus of US$150 million the previous year, it added.
Remittances from Sri Lankans working abroad grew, helping the country amass foreign reserves of US$7.1 billion in December, up from US$6.8 per cent in October.
President Mahinda Rajapakse, who is also the finance minister, told parliament in November he expected the economy to grow 7.5-8.0 per cent in calendar 2014, up from a provisional 7.2 per cent in 2013 and 6.4 per cent in 2012.
The economy recorded 8.0 per cent-plus growth for two straight years after troops crushed separatist Tamil Tiger rebels in 2009.