Inflation will continue to decline - CB Governor
The declining trend in inflation will continue to reach a single
digit level by mid this year, said Central Bank Governor, Ajith Nivard
Cabraal launching the ‘Road Map: Monetary and Financial Sector Policies
for 2009 and Beyond’.
He said inflation has been moderating since July 2008 and in line
with such deceleration inflation would reach around 8-9 per cent by mid
this year. Interest rates are expected to follow the declining trend in
inflation in 2009.
The country’s inflation reached around 28 per cent early last year,
the highest in the region. Economists attributed poor monetary policies
as causes for high inflation in the country.
The Central Bank is optimistic that the implementation of the recent
economic stimulus policy package would help to achieve a growth rate
around 6 per cent this year. Economic growth was initially revised
downward to be around 5.0-5.5 per cent this year due to the global
According to Central Bank predictions the budget deficit is expected
to decline to around 6.5 per cent of the GDP from 7 per cent last year.
The budget deficit decline is based on an expected increase of 21 per
cent in government revenue while expenditure and net lending is expected
to increase by 17 per cent.
“The new year will be a challenging year for the financial sector.
The global financial turmoil which has caused bank failures and a
liquidity crunch globally highlights the significance of risk management
and good governance in banks”, Cabraal said.
The prudent regulations adopted by the Central Bank helped the
financial institutions to face the global economic crisis. The Central
Bank will continue to be vigilant and work in collaboration with banks
and financial institutions to ensure stability and prudent management of
He said despite global and internal challenges the economy maintained
a growth rate of 6 per cent last year for the third consecutive year.
Exports grew by 12.7 per cent during the first eight months of the year
led by the performance in the traditional and minor agricultural crops.
“Development of the Northern and Eastern provinces will be a priority
this year.The Poverty Alleviation Micro Finance Project (PAMP) phase II,
a poverty alleviation micro finance scheme operated in the conflict
areas and their border districts is expected to be operational in the
Northern and Eastern provinces this year”, the Governor said.
“With the launch of the Prosperity Index, the Central Bank is more
aware of the actual development needs of the country. This has
undoubtedly streamlined our efforts in taking Sri Lanka towards
prosperity”, he said.