Sri Lanka hikes key rates to fight inflation

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According to Central Bank of Sri Lanka, the hike in interest rates are at the highest in 21 years….reports Asian Lite News

 In an effort to fight inflation due to the ongoing economic crisis, the Monetary Board of the Central Bank of Sri Lanka’s decided to increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 100 basis points to 14.50 per cent and 15.50 per cent, respectively.

This was done to tackle the rising domestic inflation, the bank said, adding that these rates are at the highest in 21 years, reports Xinhua news agency.

The central bank said that they had noted a higher-than-expected increase in headline inflation recently.

The high inflation is expected to remain in the period ahead, thus the Monetary Board was of the view that a further monetary policy tightening would be necessary to contain any build-up of adverse inflation expectations.

The central bank said that the policy adjustments would help Sri Lanka stabilise its inflation to between 4 and 6 percent in the medium term.

The bank said that they considered the impact of tighter monetary conditions on overall economic activity, including the micro, small, and medium scale businesses, and the financial sector performance, among others, against far-reaching adverse consequences of any escalation of price pressures across all sectors of the economy in the near term.

The bank raised rates by 700 basis points in April but made no further moves at its previous policy meeting in May.

It comes as annual inflation hit a record high of 54.6 per cent June as the cost of food rose by more than 80 per cent amid the crisis.

The island nation of 22 million people has witnessed its foreign exchange reserves shrink due to economic mismanagement and the impact of the Covid-19 pandemic.

As a result it has struggled to pay for imports of essential goods, including fuel, food and medicine.

In May, it defaulted on its debts for the first time in its history after a 30-day grace period to come up with $78 million of unpaid debt interest payments expired.

The country is currently in negotiations with the International Monetary Fund (IMF) over a bailout.

Sri Lanka’s government has said it needs $5 billion this year in support from the international community, including the IMF.

BP refuels Lankan flights

Over 100 flights of Sri Lankan airlines have been refuelled by India’s gas and petroleum refineries company, Bharat Petroleum at Indian airports as a support to the country reeling under its worst economic crisis and facing fuel shortage.

Taking to Twitter, Bharat Petroleum in a tweet said, “We are pleased to support Sri Lankan Airlines, with the refuelling of their long-haul flights at Indian airports, to overcome the Jet Fuel shortage in their country. So far, more than 100 flights have been refuelled at Trivandrum, Chennai & Kochi airports.”

Bharat Petroleum Limited has been associated with the Sri Lankan airlines as their refuelling partners for over a decade. It has been refuelling the long-haul flights of Sri Lankan Airlines at the Thiruvananthapuram, Chennai and Kochi airports for around the last 15 days.

“These refuellings have been done over the last fortnight by mobilising the assets and manpower for the on-time service, at very short notice. We have been associated with @flysrilankan for over a decade, as their refuelling partners,” tweeted Bharat Petroleum.

Recently, it was reported that Sri Lankan Airlines is now bracing for potential cancellations of its flights until July 18 as the jet fuel reserves in the country have run out,

With this looming fuel crisis, Sri Lankan Airlines told the employees that the flight operations will likely be impacted until the 18th of this month.

Sri Lankan management while issuing an internal memo to its employees last week, announced that the airline ran out of available jet fuel stocks on June 29 and added that due to this the services will be affected.

In an advisory earlier, the Sri Lankan Civil Aviation Authority (CAA) on June 28 issued a notice to the airlines to carry fuel for their return journeys. This is because Sri Lanka’s oil and gas company — Ceylon Petroleum Corporation (CPC) — has failed to import the required jet fuel into the country due to the foreign exchange crisis.

It is worth noting that the daily fuel usage of Sri Lankan Airlines out of Bandaranaike International Airport (BIA) is around 700,000 litres. However, the airport only managed to secure approximately 250,000 litres per day on average. (IANS/ANI)

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