COLOMBO : Sri Lanka’s central bank cut interest rates by 25 basis points in a surprise decision on Wednesday to support economic growth and propel the South Asian nation out of its worst financial crisis in decades.
The Central Bank of Sri Lanka (CBSL) reduced the Standing Deposit Facility Rate to 8.25 per cent and the Standing Lending Facility Rate to 9.25 per cent, it said in a statement.
Nine out of 14 economists and analysts polled by Reuters had predicted the monetary authority will keep interest rates unchanged to hedge against political uncertainty.
“The Board underscored the need to signal its desire to continue eased monetary conditions to sustain the revival of economic activity towards the full potential, in the absence of significant inflationary pressures,” the CBSL said.
The central bank had also reduced rates by 50 basis points in March as it continued an easing cycle that has seen rates drop by 725 bps since June last year, partially reversing the 1,050 bps in increases since April 2022.
Sri Lanka’s economy is expected to grow 3 per cent in 2024 after Colombo secured a $2.9 billion lending programme from the International Monetary Fund (IMF) early last year.
The island’s economy shrank 7.3 per cent in 2022 and 2.3 per cent last year after a record shortfall of dollar reserves and huge debt sparked a severe financial crisis.
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