Sri Lanka Slashes Interest Rates for the First Time Since Debt Restructure
Sri Lanka’s central bank made a significant move on Wednesday by cutting benchmark interest rates, the first reduction since finalizing debt restructure plans with international creditors. The Central Bank of Sri Lanka announced a 25 basis point reduction in both lending and deposit rates to support the ongoing easing of monetary policy amidst low inflation.
After experiencing a peak inflation rate of nearly 70 percent in September 2022 during a foreign exchange crisis, the inflation rate dropped to 1.7 percent in June. The central bank highlighted the importance of maintaining eased monetary conditions to sustain economic recovery.
This rate cut follows a previous 50-basis-point reduction in March. The timely repayment deal with international bond holders and the restructuring of external debt have contributed to the country’s economic revival. The economy witnessed a 5.4 percent growth in the first quarter of this year and continued to expand in the second quarter.
Despite challenges faced in the past, including protests leading to a presidential resignation, Sri Lanka’s current administration aims to stabilize state revenues through prudent financial measures after securing a substantial bailout. This positive economic outlook reflects the efforts towards sustainable growth and stability.
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