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By Shihar Aneez
COLOMBO, July 3 (Reuters) - Sri Lanka’s central bank is likely to keep key monetary policy rates steady until Aug. 17 parliamentary polls, but there could be a significant cut later if a stable government is elected, Governor Arjuna Mahendran told Reuters on Friday.
President Maithripala Sirisena dissolved parliament on June 26 in a bid to consolidate power and push through political reforms.
“Until the elections, the rates are likely to be at the current level,” Mahendran said, speaking after a news conference in the capital. “But there could be a significant rate cut after the election, if there is a stable government.”
Sri Lanka’s central bank kept key policy rates steady at record lows on Monday for a second straight month, as expected.
It left unchanged the standing deposit facility rate (SDFR) and the standing lending facility rate (SLFR), at 6.00 percent and 7.50 percent, respectively. The commercial banks’ statutory reserve ratio was unchanged at 6.00 percent.
In April, the central bank surprised markets with a 50 basis point cut to boost economic growth. Until April, rates had been steady for 14 months.
The central bank has estimated economic growth at 7 percent this year, while Finance Minister Ravi Karunanayake has said the $75-billion economy will expand up to 7.2 percent, lower than 7.4 percent last year.
Growth of 7 percent is achievable, Mahendran told the news conference, despite expansion of 6.4 percent in the first quarter, as second-half growth is expected to be higher, fuelled by a faster recovery in the construction sector. (Reporting by Shihar Aneez; Editing by Clarence Fernandez)