Sri Lanka’s central bank not to cut policy rate

Sri Lanka is unlikely to cut its already low monetary policy rates in the near term, but may gradually reduce them over the medium to long term to spur a pro-growth policy, the central bank governor said on Wednesday. Sri Lanka has since January kept rates at the lowest level in six years, hoping to spur record growth of 8.5 per cent in the $50 billion economy this year, which has been surging since the end of a three-decade civil war in May 2009. “In the medium to long term, there is a possibility of a rate reduction, but it will be in a very, very gradual manner,” Central Bank Governor Ajith Nivard Cabraal told Reuters while visiting the central Sri Lankan town of Rambukkana. “In near term, I don’t see too much scope for a rate reduction.” The repurchase rate is at 7.00 per cent while the reverse repurchase is at 8.50 per cent. Sri Lanka has generally gone the opposite way of many of its Asian peers, loosening policy and capital controls amid the global financial crisis. The island nation expanded 7.9 per cent in the first quarter, despite flooding that hit local crops hard. Tourism, telecommunications, port activities and a robust external sector have spurred second-quarter growth, he said.  From / Gulf Today