Sovereign Analysis /
Sri Lanka

Sri Lanka tightens monetary policy, but more is needed

  • CBSL hiked policy rate by 50bps, but effective tightening likely less amid ongoing rate caps at T-bill auctions

  • BOP continues to worsen amid loose monetary and fiscal stance, with reserves falling from US$4bn to US$2.8bn in July

  • LKR pressure also worsening, raising speculation for devaluation. More tightening required; retain Sell on Sri Lanka 24s

Sri Lanka tightens monetary policy, but more is needed
Patrick Curran
Tellimer Research
19 August 2021
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