Sri Lanka Inflation Accelerates, Vindicating Pause in Rate CutsBy Anusha Ondaatjie
Dec. 30 (Bloomberg) -- Sri Lanka’s inflation accelerated to a nine-month high in December, vindicating the central bank’s decision to pause its policy of cutting interest rates.
Consumer prices in the capital, Colombo, rose 4.8 percent from a year earlier after gaining 2.8 percent in November, the statistics agency said on its Web site today. That was more than the median 4.2 percent forecast in a Bloomberg News survey of six economists.
Policy rates are appropriate to support growth and are likely to remain at current levels “in the near future,” Central Bank of Sri Lanka Governor Nivard Cabraal said last month. The Colombo-based bank wants to help boost growth to as much as 6 percent in 2010 from 3.5 percent this year.
“The central bank may have to start raising rates in the second quarter of next year,” Danushka Samarasinghe, research manager at Asia Securities Ltd. in Colombo, said before the report. “The growth target won’t be threatened with prices rising as consumption and investment will keep going up.”
The central bank has cut lending rates five times this year to revive growth as inflation plunged from a record high in June 2008 to a five-year low in September.
On Dec. 14, Cabraal maintained the reverse repurchase rate at 9.75 percent, a five-year low, and kept the repurchase rate at 7.5 percent.
Cabraal said in October he expects consumer prices to rise as much as 5 percent this year, and between 5 percent and 6 percent in 2010.
Faster Growth
Gross domestic product expanded 4.2 percent in the third quarter from a year earlier, the fastest pace this year, after gaining 2.1 percent in the three months to June 30, the statistics department said Dec. 18.
Sri Lanka’s exports in October declined 4.9 percent, the least this year, as orders increased for the South Asian island’s tea and rubber.
The recovery in exports from Sri Lanka, which makes garments for Marks & Spencer Group Plc and Gap Inc., may falter as the European Union plans to withdraw trade concessions on alleged human rights violations by President Mahinda Rajapaksa’s government.
Sri Lanka will maintain fiscal and monetary stimulus through 2010 to bolster the economy, Deputy Finance Minister Sarath Amunugama said Nov. 9.
The International Monetary Fund, which granted Sri Lanka a $2.6 billion loan in July to rebuild roads and schools, expects the island’s economic growth and credit demand to pick up from this year.
To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net
Last Updated: December 30, 2009 04:36 EST
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Central Bank clarifies the issue of 1000 rupee note with President's image
Dec 31, 2009
The Central Bank of Sri Lanka (CBSL) issued a commemorative note in the denomination of Rupees 1000 to mark the ushering of peace and prosperity to Sri Lanka. The issue of this note was well received by the public. However, certain statements have been made by a few individuals who have obviously not properly understood the circumstances behind the issue of this commemorative note. Hence, this clarification is issued to clear any doubt that may arise due to these misleading statements.
1) The CBSL issues commemorative notes and coins from time to time to mark events or personage of national or international importance, in terms of the Monetary Law Act.
2) The decision to issue such a commemorative note was taken immediately after the completion of the humanitarian operations on 19th May, 2009, and as is usual, a period of around 6 months elapses from the time of intention to issue to time of actual issue. Accordingly, on 17th November, 2009 the CBSL issued the commemorative note of Rs. 1000 to mark the Ushering of Peace and Prosperity to Sri Lanka.
3) The obverse of the note contains the image of His Excellency President Mahinda Rajapaksa and also the map of Sri Lanka with the rising sun in the background and a "Punkalasa" with ears of paddy symbolizing territorial integrity and prosperity respectively, that are results of national harmony and peace. The valiant contribution made by the nation's victorious sons and daughters of all security forces and the police is the theme on the reverse of the note. The design at the center depicts the hoisting of the national flag by members of the security forces. The note was designed by a Sri Lankan artist.
4) The use of the image of the Head of the State in currency notes and coins has been the case in many countries. In Sri Lanka, several currency notes have been issued depicting the images of the British rulers even after Sri Lanka became an independent country. In 1951, His Majesty King George VI of England was depicted on currency notes Re. 1 and Rs. 10. In 1952, Her Majesty Queen Elizabeth II of England was depicted on currency notes Re. 1, Rs. 2, Rs. 5, Rs. 10, Rs. 50 and Rs. 100. Further, the portrait of Her Majesty Queen Elizabeth II was depicted on a coin issued in 1955.
5) During the period from 1962 to 1970 several series of currency notes were issued depicting the image of former Prime Minister, Hon. S W R D Bandaranaike.
6) In 1978, a coin containing the portrait of then President, His Excellency J R Jayawardena was issued to commemorate his induction as President.
7) In 1992, a coin containing the portrait of then President, His Excellency R Premadasa was issued to commemorate the 3rd anniversary of his induction as President.
It is therefore clear that the CBSL has followed usual procedures as well as been consistent with traditional practices, in the issue of this new currency note.
Courtesy: Central Bank of Sri Lanka
