Starting April 1, Sri Lanka's central bank announced the removal of price controls on rupee lending rates, citing continued declines in market rates.
The decision to lift the price control order on rupee-denominated lending products, which was imposed in August 2023, comes as interest rates have fallen below anticipated levels.
The central bank stated that the price control order had effectively lowered overall market lending interest rates as intended. However, with ongoing monetary policy easing and the normalization of the economy, the order is deemed no longer relevant. The shift away from administrative measures towards market-based instruments aligns with the evolving economic landscape.
Governor Weerasinghe expressed confidence in further rate reductions, noting that interest rates have already reached lower levels than initially anticipated.
Analysts attribute the decline in rates to the central bank's net deflationary policy, improved domestic credit conditions, and enhanced confidence stemming from better budgeting and management of state enterprises.
