Sri Lanka Central Bank Implements Single Policy Rate

Sri Lanka's central bank (CBSL) has introduced a single policy interest rate mechanism, setting the Overnight Policy Rate (OPR) at 8% to stimulate economic recovery from a prolonged financial crisis. This change, which marks a shift from the previous dual rate system, aims to enhance monetary policy signaling and efficiency under the Flexible Inflation Targeting framework. The CBSL's decision follows a $2.9 billion program from the International Monetary Fund (IMF) and a bond swap initiative to aid in $12.55 billion debt restructuring. Analysts predict that easing interest rates will help bolster economic growth, which is projected to increase by 4.4% this year after a severe contraction in 2022. Inflation has stabilized, with recent data showing a 0.8% decline in prices, while the rupee has appreciated by 11.3%. These measures reflect a cautious optimism for the nation's economic trajectory as recovery efforts gain momentum.