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Central Bank continues its Accommodative Monetary Policy Stance

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 07 April 2021, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively. The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts. The Board remains committed to maintaining the low interest rate structure, thereby ensuring continued support for a sustained economic recovery, in the context of the prevailing low inflation environment and well anchored inflation expectations.

The global economy is expected to recover faster than expected, supported by policy stimulus measures and the rollout of COVID-19 vaccines
As per the World Economic Outlook (WEO) of the International Monetary Fund (IMF) in April 2021, global growth in 2020 was estimated to have recorded a lower than expected contraction of 3.3 per cent, reflecting the faster recovery of economic activity during the second half of 2020 underpinned by extraordinary policy support. Global growth projections were revised upwards to 6.0 per cent in 2021 and 4.4 per cent in 2022. The pace of economic recovery varies across regions and countries, reflecting the differences in the speed of vaccine rollout, the degree of economic policy support, and structural features.

The Sri Lankan economy rebounded notably from the effects of the COVID-19 pandemic
As per the GDP estimates published by the Department of Census and Statistics (DCS), the contraction of the Sri Lankan economy at 3.6 per cent in 2020 was lower than initial projections. Despite the second wave of COVID-19 in the country, the Sri Lankan economy grew by 1.3 per cent in the last quarter of 2020 from a year earlier. Supported by the growth-conducive environment made possible by the accommodative monetary and fiscal policies, the successful containment of the spread of COVID-19 locally, and the stronger-than-expected recovery of leading trading partners, the Sri Lankan economy is expected to record a high growth momentum in the medium term.