Sri Lanka Holds Rates a Third Month After IMF Loan Agreement

  • Central bank sees inflation staying in mid-single digit levels
  • IMF loan to "improve investor confidence in country"

Sri Lanka left its benchmark rates unchanged for a third straight month after it agreed a $1.5 billion loan from the International Monetary Fund to help improve public finances.

The Central Bank of Sri Lanka kept the standing lending facility rate at 8 percent and the standing deposit facility rate at 6.5 percent, it said in a statement on Friday. The move was predicted by eight of nine economists in a Bloomberg survey while one saw a 50 basis point increase.

Inflation is expected to remain in "mid-single digit levels," the central bank said. "The Extended Fund Facility expected from the IMF and the other multilateral and bilateral credit facilities, along with the planned structural reforms, would enhance the country’s resilience to external shocks and improve investor confidence in the economy."

The island economy will grow 5.8 percent in 2016 from 4.8 percent in 2015, and the pace may quicken to 7 percent in the medium term as investor sentiment improves, the central bank said last month. Sri Lanka’s refinancing concerns had prompted Fitch Ratings in February to downgrade its credit ratings and S&P Global Ratings cut the nation’s outlook to negative.

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