COLOMBO: Sri Lanka’s central bank kept its key policy rates steady on Friday, a little more than a month after it unexpectedly cut the main lending rate, forecasting a modest recovery in the economy this year after growth slumped to a 16-year low in 2017.
The central bank´s widely expected decision comes amid worries about political instability after the ruling coalition lost a local government election earlier this year, leading to the defection of 16 of its members to the opposition.
The central bank left the standing lending facility rate (SLFR) at 8.50 percent and standing deposit facility rate (SDFR) at 7.25 percent, saying it “aims at stabilising inflation in mid-single digit levels in the medium term.”
The bank estimated 2018 growth to be around 5 percent, higher than the International Monetary Fund´s (IMF) 4 percent forecast.
In its policy statement, the central bank predicted a “moderate” economic recovery this year, thanks to strengthening global growth and improving domestic conditions.
“Forward looking indicators suggest an improvement in the economic performance on the back of the modest recovery in the agriculture sector and continued positive momentum in the industry and services sectors,” the statement said.
Growth slipped to a 16-year low in 2017, hit by widespread flooding and a pullback in foreign investment.
Worries of political instability have lately cast a cloud on the outlook.
President Maithripala Sirisena suspended the parliament last month, reconvening it only this week, underscoring investor uncertainty about broad policymaking and economic management.