Sri Lanka will be capable of containing domestic inflationary pressures if crude oil prices remain near USD 80 a barrel through the end of this year, Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe said.
Speaking during an official visit to Sydney, Australia, where a Sri Lankan delegation is seeking to attract foreign investment to the Colombo Stock Exchange, the Central Bank chief outlined the nation's macroeconomic outlook amidst volatile global energy markets.
He explained that while elevated energy costs continue to exert upward pressure on local prices and weigh on the local currency, existing policy measures should allow policymakers to manage the situation provided no major external shocks occur.
Inflation expected to move towards 5%
The Central Bank expects headline inflation to cool back towards its target of 5 percent during the second half of this year and persist into next year.
The Governor credited this ongoing stabilization to decisive monetary policy interventions alongside state level import controls.
To curb credit demand following rising energy costs, the Central Bank raised its benchmark interest rate by one percentage point in May before opting to hold the overnight policy rate steady in July to balance price stability with economic recovery.
Growth expected to moderate
Addressing concerns over the wider economy, the Governor said that tighter monetary conditions and elevated prices are not anticipated to inflict severe damage on domestic economic output.
He projected that overall economic expansion would moderate to between 4 percent and 5 percent during the latter half of the year.
As Sri lanka works to recover from its historic 2022 sovereign default, the Governor reiterated that Sri Lanka remains on track to complete its four year IMF loan programme by the second half of 2027, with the next review scheduled for November or December.
Leave your comments
Login to post a comment
Post comment as a guest