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IMF says Sri Lanka inflation a risk, warns against policy easing
May 03, 201312:02 AM
Sri Lanka must not loosen monetary conditions as inflation remains a concern, the International Monetary Fund said, even though prices had risen at a lower pace in April than the previous month.
Sri Lanka’s central bank has said the monetary policy stance for this year will be toward easing to help drive growth, and Treasury Secretary P. B. Jayasundera said recently that he expected interest rates to fall as early as May or June.
But the IMF said inflationary pressures were building up as the impact of higher power tariffs feeds through the economy.
“Inflation came down quite a bit. But we expect that inflation figure to rise once again as the impact of electricity tariff hike is fully reflected ,” Koshy Mathai, the IMF resident representative for Sri Lanka, said.
“As a result we think the monetary policy should remain on hold for now as it has for quite some time and shouldn’t be changed prematurely. It’s hard to say how long (the rates should be maintained).”
The central bank cut both repurchase and reverse repurchase rate by 25 basis points in December but has since held steady.
Inflation eased to 6.4 percent in April compared to 7.5 percent a month ago and it is likely to accelerate in May due to the electricity tariff hikes, the Department of Census and Statistics has said. - Reuters
