The Central Bank said this week that with growth prospects in the Sri Lankan economy improving with the end to war, it was discontinuing the penal rate of interest charged on the Bank’s Reverse Repurchase transactions.
It was also reducing the Reverse Repurchase rate by 25 basis points to 11.50 per cent, removing restrictions on the number of times that a participating institution can access the reverse repurchase standing facility of the Central Bank at the Reverse Repurchase rate, among other decisions.
The Bank said Sri Lanka is poised to enter a more promising, yet economically challenging era. Growth prospects in 2009, which were dampened by the global downturn in economic activity, have now brightened. Rising domestic demand along with the reconstruction and development of areas liberated will help expand domestic production and thereby add to the country’s output, the statement added.
The foreign exchange market has also stabilised, as reflected by the strengthening of the rupee over the last few days. With the continuous decline in inflation and flexibility in the nominal exchange rate, the real exchange rate has depreciated, improving the competitiveness of the country’s external trade. While inflows of private remittances during the first quarter of 2009 have been more than sufficient to finance the deficit in the trade balance for the same period, there are indications of improved prospects for Sri Lanka’s key exports such as garments and tea, the Bank said.