Sri Lanka keeps policy rates unchanged

The repurchase (repo) and reverse repurchase rates remain unchanged at 7.75 per cent and 9.75 per cent, respectively.

The central bank said that consequent to the policy measures adopted in March and April, the desired drop in import expenditure has helped narrow the trade deficit.

The receipt of the final tranche of IMF's stand-by facility of USD 414 million, the proceeds of the successful fifth international sovereign bond issue of USD 1 billion last month and other inflows have raised the gross official reserves to around USD 7.1 billion by end July.

The year-on-year inflation, which remained at single digit levels over the last three years, increased in July, the bank noted. The prevailing drought conditions and curb on domestic food supplies led to the high inflation, it added.

Sri Lanka is also seeking a fresh facility from IMF to finance the development drive amid criticism from the opposition that the government has put the country in a heavy debt trap.