Cbsl Keeps Interest Rate Steady

 Cbsl Keeps Interest Rate Steady

Cbsl Keeps Interest Rate Steady At 9%; Inflation Remains High.

Sri Lanka's central bank, the CBSL, has kept the interest rate unchanged. As per the details, the rate for a standing deposit facility is around 9%, while the rate for a lending facility is nearly 10%.

The decision from the CBSL was the same as the forecast a group of economists made. The new tax Sri Lanka's government imposed has put upward pressure on the country's inflation rate.

Amidst this, the country is also trying to work out the details to get more money from the IMF. So, that's also an essential factor that has prevented the CBSL from a rate cut.

5% Inflation Target From Cbsl

The CBSL has set an inflation target of 5%, so it can't go with rate cuts in the short to medium term. The country has carefully selected the inflation target as it is trying to kickstart the economy once again.

According to a statement, the factors from the supply side and taxation have made inflation higher in the near term. The statement also added that the inflation increase is most likely short-lived.

In 2023, Sri Lanka's central bank made a 650 bps rate cut as the country attempted to recover from a default & a major financial crisis.

Just a week ago, the IMF stated that citizens' living conditions should be directly tied to improving their economic conditions.

In the first few days of 2024, Sri Lanka jacked its VAT (tax) from 15% to a historic high of 18%. This decision was made as a part of the IMF program and aims to improve tax revenue.

An increase of 3% in the VAT has directly led to a rise in the inflation rate. In September 2022, the inflation rate in Sri Lanka was around 70%, which moved lower to 4% in December 2023.

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