S.Lanka's 2007 reserve money target met, says cenbank

COLOMBO, Jan 1 (Reuters) - Sri Lanka largely achieved its reserve money target for 2007 with the help of tight monetary policy, the central bank said.

Reserve money at the end of December totalled 264.5 billion rupees ($2.43 billion) against a target of 267.6 billion rupees, the bank said in a statement on Tuesday.

Reserve money is the central bank's main barometer in deciding monetary policy and it had hoped that keeping it within target would help slow money supply growth and inflation.

"Though the actual amount is 3 billion rupees short of the target, it is a huge success, because we couldn't achieve the target reserve money in 2006," a central bank official, who asked not to be identified, told Reuters.

However, the official declined to elaborate further.

"The Central Bank's policy interest rates were raised by 50 basis points in February 2007 and moral suasion and several regulatory measures have been used to discourage the usage of reverse repurchase facility," the central bank statement said.

Aggressive open market operations were also conducted to absorb excess liquidity.

"These policy measures have been instrumental in reducing the reserve money expansion from 21 per cent in 2006 to 10.3 per cent in 2007 as against the targeted expansion of 11.6 per cent." ($1=108.65 rupees) (Reporting by Shihar Aneez; editing by Kim Coghill) ((shihar.aneez@reuters.com; +94-773-763-577; Reuters messaging; shihar.aneez.reuters.com@reuters.net))