Monetary policy transmission to the real economy in Sri Lanka is still incomplete, the governor of the country’s central bank, Nandalal Weerasinghe, said at a LSEG FX Community Event on Monday.
Weerasinghe said he would like to see private sector interest rates come down further and at a faster pace, adding that the domestic debt restructuring is the most important focus for the debt-laden country in the near-term
Hit by a severe foreign exchange shortage last year, Sri Lanka‘s economy crumpled, pushing the central bank to raise interest rates to record levels to counter rampant inflation and currency pressure.
The country secured a $2.9 billion rescue package from the International Monetary Fund (IMF) in March.
In the last two months Sri Lanka has slashed policy rates by 450 basis points, signalling a focus on growth after the crisis-hit economy contracted by 7.8 per cent last year.
Sri Lanka is on track to post a stronger performance this year than the 3 per cent contraction projected by the IMF, Weerasinghe said.