SL hikes interest rates to tackle inflation and stabilise economy

SL hikes interest rates to tackle inflation and stabilise economy

Colombo: Sri Lanka's central bank has decided to hike interest rates by an unprecedented 700 basis points to tame high inflation amid the worst economic crisis that has led to protests across the country and put President Gotabaya Rajapaksa under mounting pressure to resign.

The move comes as Sri Lanka's main Opposition party SJB on Friday announced that it will move a no-confidence motion against the government of President Rajapaksa and is prepared to impeach the embattled leader if he fails to address the concerns of the public facing hardships due to the economic crisis.

The Monetary Board of the Central Bank of Sri Lanka on Friday decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 700 basis points to 13.50 per cent and 14.50 per cent, respectively, effective from the close of business on April 8.

The Board noted that the inflationary pressures could further intensify in the period ahead, driven by the build-up of aggregate demand, domestic supply disruptions, exchange rate depreciation and the elevated prices of commodities globally. It was of the view that a substantial policy response is imperative to arrest the buildup of added demand-driven inflationary pressures in the economy and preempt the escalation of adverse inflationary expectations, to provide the required impetus to stabilise the exchange rate and also to correct anomalies observed in the market interest rate structure.

Meanwhile, protests continued across the country, demanding the resignation of the President and the entire Rajapaksa family from the government. Thousands of protesters gathered in the capital on Saturday, demanding President Rajapaksa's resignation as the country experiences its worst economic crisis since independence from British rule in 1948.

Large crowds carrying the national flag and banners walked into Central Colombo's Galle Face Esplanade, despite a government notice reading the place is out of bounds due to urgent construction work. According to users on Facebook, the number of people at the protest on Saturday in Central Colombo is set to swell to 1 million.

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