Inflation still at single digit level, growth 8.3 pc

The Sri Lankan economy is estimated to have grown by around 8.3 per cent in 2011, recording the second consecutive year with an annual growth rate of 8 per cent or above for the first time in the post-independence history.

Year-on-year inflation has remained at single digit levels in the last 37 months, and in February 2012 inflation fell to 2.7 per cent the Central Bank of Sri Lanka’s Economic Research Department said in a release.

It said: Inflation is expected to continue to be at single digit levels in 2012, notwithstanding the recent adjustments to domestic energy prices. The debt to GDP ratio is also projected to improve to below 79 per cent in 2011, the lowest after 1981.

With effect from February 9, 2012, the Central Bank of Sri Lanka has intervened in the foreign exchange market mainly for the partial settlement of oil bills.

Governor Central Bank, Ajith Nivard Cabral speaking to ‘Daily News’ said that due to the low inflation that was maintained the revised fuel prices would not have any negative impacts to the economy. “The government wanted to increase the fuel prices last August but it was not done since it was not the appropriate time,” he said.

In that background, it is clear that the government of Sri Lanka and the Central Bank of Sri Lanka have taken necessary measures that would strengthen Sri Lanka’s performance on the fiscal front, the monetary front and the external front. Accordingly, SP’s revision of Sri Lanka’s foreign currency rating outlook from ‘positive’ to ‘stable’ and lowering the country’s long-term local currency rating from BB- to B+ at this juncture, is highly unwarranted.