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| Sunday, 17 April 2005 |
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| News Business Features Editorial
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No change in policy interest rates - Central Bank Having reviewed the recent economic developments and projections, the Monetary Board has decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their current levels and continue conducting open market operations more aggressively to mop up excess liquidity from the market and contain the growth of reserve money to targeted levels through a planned program of permitting the market to subscribe to the maturing Treasury bill holdings of the Central Bank, a media release from the Central Bank said. The following is an assessment of the factors that were taken into consideration in arriving at this decision. The latest available indicators point to a continuation of the growth momentum in 2005 with a broad-based expansion in all three sectors. The performance of the agriculture sector is likely to improve with favourable weather conditions. The industrial sector will benefit from the expansion in all major sub sectors within factory industries, the increase in construction activities as well as the increase in hydropower generation as a result of improved weather. The services sector, which has continued to be the mainstay of overall growth, is expected to expand with the expected growth in telecommunications, port and transport services. In the external sector, export earnings will continue to grow in 2005 aided by the favourable external environment. The increases in textile and garments, rubber products, leather products and petroleum exports are expected to contribute to the increase in exports. External reserves have increased with the receipt of emergency assistance from the IMF, and loans from the ADB and the World Bank as well as increased private inflows. The overall BOP too recorded a surplus of about US dollars 120 million as at March 31, 2005. Reflecting these developments, the rupee has appreciated against the US dollar by 5.0 per cent from December 31, 2004 to April 8, 2005. Inflation continues to remain high due to both demand and supply factors. However, the point to point change in the Colombo Consumers' Price Index (CCPI) declined marginally to 15.5 per cent in March 2005 from 15.9 per cent in February 2005 with the improvement in supply conditions of domestic food crops, the release said. |
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