The Bank of Sri Lanka (CBSL) today (July 7) raised interest rates by 1% to curb record-high inflation and control inflation expectations.
CBSL increased the interest rate on the standing loan facility by 1% to 15.50% and the interest rate on the standing deposit facility to 14.50%.
“The Central Bank’s Monetary Policy Committee considers this policy adjustment will bring inflation forecasts back to their targets in the medium term. At the same time, it will help curb inflationary pressures caused by rising domestic demand,”CBSL said.
Sri Lanka, home to 22 million people, is experiencing a shortage of foreign currency, which is needed to pay for key imported goods such as fuel, fertilizer, food, and medicine.
On June 22, Sri Lankan Prime Minister Ranil Wickremesinghe admitted that Sri Lanka’s economy has completely collapsed. An agreement with the IMF is the only way to save Sri Lanka from the crisis.
Sri Lanka will need $6 billion over the next few months to replenish the reserve fund, pay down debt on high-value imported goods, and stabilize the currency.