Sri Lanka's central bank says more rate cuts are needed for economy to 'bounce back'

Debt-ridden Sri Lanka whitethorn request to chopped involvement rates again to further boost maturation successful its economy, according to the caput of its cardinal bank.

Nandalal Weerasinghe, politician of the Central Bank of Sri Lanka, told CNBC Friday that determination volition beryllium much complaint cuts to come, adjacent aft the cardinal slope lowered its argumentation rate for a 2nd consecutive period from 12% to 11% connected Thursday.

Asked if further complaint cuts volition beryllium needed, the politician answered: "Of course." He pointed to falling ostentation rates successful the Sri Lankan economy.

"We should request further simplification successful involvement rates connected the ground of forward-looking inflation, forward-looking output gap. This shows we made the close decision," Weerasinghe told CNBC's "Squawk Box Asia."

Sri Lanka negotiated a astir $3 cardinal bailout from the International Monetary Fund past year, aft thousands of protesters drove retired the president from power, raiding his authoritative residence and bureau connected outrage implicit the government's economical mismanagement.

Stocks listed successful its superior Colombo jumped earlier successful the week aft parliament approved a home indebtedness restructuring plan past weekend.

Colombo's CSE All Share Index jumped by astir 8% this week aft parliament passed the program required for the IMF's bailout package.

Sri Lanka's full indebtedness has exceeded $83 billion, the Associated Press reported, including overseas indebtedness of $41.5 cardinal and $42.1 cardinal of home debt.

Prices successful Sri Lanka roseate 12% successful June, the latest authorities information showed – a steep diminution from the caller highest ostentation complaint of astir 70% seen successful September past year.

The cardinal slope politician was optimistic astir the economy's way forward. He predicted ostentation could autumn to single-digit figures and the system could crook from contraction to maturation by adjacent year.

"If you look astatine the future, forward-looking inflation, we spot precise clearly, end-of-July ostentation volition beryllium 7% by azygous digit and by extremity of the year, [inflation] volition beryllium debased single-digit," helium said.

Weerasinghe said further argumentation enactment from the cardinal slope could assistance economical revival successful the nation.

"We anticipation that [rate cuts] tin beryllium immoderate benignant of enactment for the betterment for the 2nd fractional of the year. And evidently for the adjacent afloat year, we expect the state to bounce backmost to affirmative territory," helium said.  

The Sri Lankan system contracted by 11.5% year-on-year successful the archetypal 4th of 2023, gross home merchandise figures released past period showed.

The economy's GDP has stayed successful antagonistic territory since the archetypal 4th of 2022.