Sri Lankan central bank keeps rates steady

COLOMBO, Feb 17 (AFP): Sri Lanka's central bank kept interest rates steady Monday, saying the economy showed signs of improvement with foreign cash unlike most emerging markets facing capital outflows.
The Central Bank of Sri Lanka in its monthly review decided to hold lending rates at multi-year lows of 8.0 per cent, but hinted that there could be further cuts after a 50 basis point reduction last month.
"Longer term lending rates, which displayed some downward adjustments in January, have space to decrease further," the bank said.
It noted modest flows of foreign capital into the Sri Lankan economy despite the reduction in the US bond-buying programme which has triggered a flight of capital from other emerging markets in recent weeks, the bank said.
"The effect of the tapering of the US quantitative easing (QE) programme on the Sri Lanka economy is expected to be minimal", the bank said attributing it to "investors who have a serious and long term view of the Sri Lankan economy".
It said Sri Lanka attracted a net inflow of $119 million this year.
Last week, the bank said record remittances and tourism earnings helped wipe out a trade deficit in 2013 and improve foreign reserves in a country relying heavily on external debt.
Sri Lankans employed abroad sent home $6.8 billion last year, up 13 per cent from 2012 while earnings from tourism jumped 35 per cent to $1.4 billion in 2013, according to official figures.
They showed Sri Lanka's overall balance of payments ended up with a surplus of $991 million, compared to a modest surplus of $151 million in 2012 and a deficit of $1.06 billion in 2011.