CBSL decision to raise the policy rate is appropriate - IMF

COLOMBO (News 1st); The IMF Mission in Sri Lanka says that the decision taken by the Central Bank of Sri Lanka to raise the policy rate is appropriate and in line with its objectives set under the inflation targeting framework.

Peter Breuer, Senior Mission Chief for Sri Lanka, and Masahiro Nozaki, Mission Chief for Sri Lanka noted that it reflects CBSL’s commitment to the inflation target and is an important part of the disinflation strategy in the EFF program, which is fully committed by the Sri Lankan authorities and supported by the IMF.
 
Sri Lanka’s inflation is declining but remains at a very high level, which has been disproportionally hurting the poor, the statement added. 

"Upside inflation risks could reverse the trend and lead to persistently high inflation which is extremely costly to the economy," they further added.

Therefore, CBSL’s decision to raise the policy rate shows its commitment to reduce inflation more quickly and firmly towards the single-digit target. 

Durable disinflation would help boost market confidence, reduce excessive risk premia and ease the financing conditions for the corporates, especially the small and medium enterprises, which supports recovery.

Sri Lanka is ready to adopt the IMF program within March 2023, said Central Bank Governor Dr. Nandalal Weerasinghe on Friday (3) during the Monetary Policy Review.