Sri Lanka's Rate Cuts `Sufficient' for Now to Support Growth, Cabraal Says

Sri Lanka’s interest-rate cuts in July and August are “sufficient for the time being” to support economic growth, central bank Governor Ajith Nivard Cabraal said before next week’s monetary policy announcement.

“We are confident of a faster upturn in credit growth in the next few months,” Cabraal said in a telephone interview late yesterday from the capital Colombo.

Since July, the Central Bank of Sri Lanka has lowered its reverse repurchase rate by three-quarters of a percentage point to 9 percent, the lowest level since November 2004, taking advantage of low inflation to bolster the economy.

Cabraal said yesterday’s announcement to boost the minimum capital requirement for banks would help improve lending.

The benchmark four-year government bond yield rose 30 basis points to 8.1 percent at 11:20 a.m. in Colombo, according to the local unit of Standard Chartered Plc. A basis point is 0.01 percentage point. The Colombo All-Share Index advanced 1 percent to 5,946.31.

Sri Lanka’s consumer and corporate credit grew 6.2 percent to 1.27 trillion rupees ($11.3 billion) in June from a year earlier, according to the central bank.

Consumer prices in Colombo rose 5 percent in August from a year earlier, which is less than half the average rate of the five years through 2009.

The next monetary policy announcement is scheduled for Sept. 15.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

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