(Bloomberg) -- Sri Lanka’s central bank kept its benchmark interest rates unchanged in its first meeting since a new president was elected and uncertainty over the International Monetary Fund loan program looms.
The Central Bank of Sri Lanka held the standing lending facility rate at 9.25% on Friday — in line with the forecasts of most economists surveyed by Bloomberg. The deposit facility rate was also left unchanged at 8.25%.
Anura Kumara Dissanayake, a leftist political outsider, won Sri Lanka’s presidential election on Sept. 21 in a stunning rebuke of the political elite, who voters blamed for leading the island nation into a historic economic crisis two years ago. His National People’s Power is a coalition of leftist political parties and groups backed by protesters responsible for ousting President Gotabaya Rajapaksa in 2022.
Inflation has been below the central bank’s target of 5%, giving it room to keep rates low. The bank said on Friday that inflation is likely to remain well below target over the next few quarters, “potentially recording deflation in the immediate future driven by changes to administratively determined prices and easing of supply conditions.”
The bank also said that the “robust growth outcome” recorded in the first half of 2024 is likely to continue through the remainder of the year, resulting in a higher growth for 2024 than initially projected.
The South Asian nation’s economy grew faster than expected in the second quarter, data showed ahead of the polls. After sliding Monday, Sri Lanka’s dollar bonds have rebounded following Dissanayake’s call for an early parliamentary election and that he’d seek new talks with the IMF. Local shares have also extended gains since the election.
The new president has vowed to reopen negotiations with the multilateral lender over its $3 billion bailout, which may cause delays in the disbursement of funds. He said this week he’ll also start discussions with creditors over debt restructuring deals.
“The continuation of the Extended Fund Facility arrangement with the IMF and early finalization of the debt restructuring process will support the strengthening of external sector buffers further,” the central bank added.
READ: Sri Lanka’s Leftist Leader Faces Tough Test to Alter IMF Deal
--With assistance from Shinjini Datta, Nurin Sofia and Shwetha Sunil.
(Updates with central bank comment in fourth paragraph)
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