Central Bank raises rates by a full point to defend the rupee
The move came as the currency slid sharply on the back of weaker tourism and remittance inflows.
The Central Bank of Sri Lanka raised its benchmark interest rate by a full percentage point in late May, moving to support the rupee and contain inflation after the currency weakened markedly.
The rupee has lost around 14 percent of its value since the onset of the conflict in the Gulf, as two of the economy’s key sources of dollars — tourism receipts and worker remittances — have thinned.
A delicate balance
Higher rates can steady a currency, but they also raise the cost of credit for businesses still rebuilding after years of crisis. The bank signalled it would remain data-dependent in the months ahead.
Aisha writes on macroeconomics, the rupee and Sri Lanka’s recovery from default.
