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Lanka Expects 3.7% Growth

Lanka Expects 3.7% GrowthLanka Expects 3.7% Growth

Sri Lanka expects the economy to grow 3.7% in the first quarter of 2018 driven by service sector expansion, Central Bank Governor Indrajit Coomaraswamy said Friday, Economynext reported. The growth was still below potential, he said. Sri Lanka’s central bank which is intervening in forex markets and collecting reserves is operating a soft-pegged monetary regime, which frequently goes into balance of payments crises. The policy stance was now ‘neutral’ Coomaraswamy said, from an earlier tight policy until April. The central bank cut the ceiling policy rate on April 4 from 8.75% to 8.50%, when overnight rates, which had fallen from near ceiling rate close to the 7.25% floor rate, suddenly shot up to rate ceiling. It has now turned out that in March private credit spiked to 122 billion rupees ($773 million), which had helped push rates up. The central bank then injected cash through reverse repo auctions at rates as low as 7.50% generating a run on the rupee towards the end of April, undermining the credibility of its downward crawling dollar peg.

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