Sri Lanka c. bank to focus on stronger crisis recovery in 2025
Sri Lanka will focus on stronger recovery this year after the island nation posted real GDP growth of 5 per cent in 2024, the highest in seven years, its central bank chief said on Wednesday, hoping to accelerate a rebound from its worst financial crisis in decades.
Sri Lanka is targeting a stronger economic recovery in 2025, following 5% GDP growth in 2024. After securing an IMF program and completing debt restructuring, the central bank plans policies to boost private credit and maintain inflation at 5% by mid-2025.
Sri Lanka's economy crumpled under a severe foreign exchange crisis in 2022, but has posted a faster than expected rally after it secured a $2.9 billion International Monetary Fund (IMF) program in March 2023 and completed a $25 billion debt restructuring in December.
The economy grew 5.2 per cent in the first nine months of 2024, outstripping the 3 per cent estimate by the Central Bank of Sri Lanka (CBSL), Governor P. Nandalal Weerasinghe said.
Taking advantage of lower inflation, which reached minus 1.7 per cent in December, Sri Lanka's central bank set a new single policy rate of 8 per cent, easing monetary settings below previously used benchmarks and setting the stage for stronger private sector credit growth, Weerasinghe added.
Inflation is expected to reach positive territory in mid-2025, after which CBSL will focus on maintaining a 5 per cent inflation rate.
CBSL will also strengthen monetary policy forecasting, continue to improve its reserve buffers under the IMF program, and introduce a benchmark spot exchange rate in 2025. Weerasinghe said.
Sri Lanka will continue recapitalisation of banks, consolidate large finance companies, and review the Statutory Reserve Ratio (SRR) of 2 per cent to increase financial system stability, the Governor added.
Source: www.channelnewsasia.com
