While substantial foreign investments are expected during the remainder of the year, the recent discovery of natural gas deposits off the Mannar coast will further draw investor attention, the Central Bank (CB) said this week.
In a statement on monetary policy, the CB said substantial amounts of foreign inflows on account of direct investments, equity investments and other inflows to the private sector ‘are expected during the remainder of the year. This would be enhanced by the recent announcement of the discovery of natural gas deposits in the Mannar basin – although further research is required to assess its commercial viability’.
Increased remittances, higher earnings from tourism, as well as other inflows to the services account continue to cushion the impact of the trade deficit on the overall balance of the Balance of Payments, the regulator noted.
Inflation continued to moderate with the year-on-year change in the Colombo Consumers’ Price Index declining from 7 % in August to 6.4 % in September while annual average inflation increased marginally from 7.1 % in August to 7.2 % in September.
The CB said credit to the private sector has been increasing by around Rs.36 billion on average per month in 2011 reflecting continued expansion of economic activity.
The increase in net credit to the government by the banking sector also contributed to the monetary expansion though the growth of money supply is expected to moderate in the period ahead given the decline in excess liquidity in the money market, the CB added.
It said the Monetary Board, at its meeting held on October 10 decided to maintain the policy interest rates of the Central Bank at their current levels with the Bank’s Repurchase rate at 7 % and the Reverse Repurchase rate at 8.5%.