CBSL relaxes its Monetary Policy Stance

Colombo (News 1st); The Monetary Board of the Central Bank of Sri Lanka, decided to reduce the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 100 basis points each, to 4.50 per cent and 5.50 per cent, respectively.

The Board arrived at this decision with a view to inducing a further reduction in market lending rates, thereby encouraging the financial system to aggressively enhance lending to productive sectors of the economy, which would reinforce support to

COVID-19 hit businesses as well as to the broader economy, given conditions of subdued inflation.

CBSL said the spread of the COVID-19 pandemic has significantly impacted near term growth prospects globally, while available indicators for Sri Lanka also suggest that economic growth is likely to have been severely affected during the second quarter of 2020.

Although a rebound is expected during the second half of the year with the support of monetary and fiscal stimulus measures, the introduction of growth promoting and confidence enhancing structural reforms is imperative to foster high and sustainable economic growth over the medium term.

On the external front, the trade deficit is estimated to have narrowed during the first five months of 2020, with the contraction in imports outweighing the contraction in exports.

Gross official reserves stood at US dollars 6.7 billion by end June 2020, sufficient to cover 4.2 months of imports.