Sri Lanka reduces policy rates by 50 bps to boost growth

By Thomson Reuters Mar 25, 2024 | 9:07 PM

By Uditha Jayasinghe

COLOMBO (Reuters) – Sri Lanka’s central bank lowered interest rates by 50 basis points in an unexpected move on Tuesday as it focused on boosting growth prospects to steer the island nation out of its worst financial crisis in decades.

The Central Bank of Sri Lanka (CBSL) reduced the Standing Deposit Facility Rate to 8.50% and the Standing Lending Facility Rate to 9.50%, it said in a statement.

The central bank has now slashed interest rates by a total 700 basis points since last year as Sri Lanka’s economy began a painful recovery from its worst financial crisis since independence from the British in 1948.

“The Board arrived at this decision following a comprehensive assessment of current and expected domestic and international economic developments, to maintain inflation at the targeted level of 5% over the medium term, while enabling the economy to reach its potential,” CBSL said.

The central bank had kept its policy rates unchanged in January to tame inflation after a 3% sales tax increase at the start of the year pushed up prices and boosted inflation to 5.9% in February.

(Reporting by Uditha Jayasinghe, editing by Swati Bhat)