* Economy could grow more than 7.5 pct in 2013
* Cbank says rupee could settle at 125 in future
By Shihar Aneez
COLOMBO, Oct 22 (Reuters) - Sri Lanka's central bank sees no
need to change its policy rates in the near future and it has
reduced credit growth to the desired level, Governor Ajith
Nivard Cabraal said.
"Our overall policies are working in the way we had
projected and wanted it to work," Cabraal told Reuters on
Monday. "So I think there is no need for us to make any further
adjustments in the near future."
Cabraal was speaking ahead of the Monetary Board's October
meeting, on Monday, to set policy rates. The bank will announce
its monetary policy stance at 0200 GMT Tuesday.
Sri Lanka raised rates twice in the first four months of the
year to nearly three-year highs and imposed tough credit
controls and a flexible exchange rate to deal with trade and
balance-of-payments deficits from 2011.
In February, the central bank limited credit growth to a
maximum of 23 percent in 2012 from 35 percent last year. In
2011, the policy of a defended rupee and lower interest
rates fueled cheap credit and a huge import bill, resulting in a
record trade gap.
"Credit growth has come down to the level that we had
wanted. Our view is it will be resting in that exact spot we had
projected," Cabraal said without giving data on recent credit
Cabraal also said the central bank, which is concerned about
future inflationary pressures does not need to cut policy rates
at the moment.
Keeping the rate unchanged "seems to be appropriate," he
said adding that the central bank is looking at 8-8.5 percent
annual inflation by end-2012.
The island nation's economic growth is projected to slow to
6.8 percent from last year's record 8.3 percent due to tough
policy measures and conditions in Europe, Sri Lanka's top export
Early this year, the central bank had estimated 8.5 percent
growth in 2013, but Cabraal said this is too ambitious.
"The global conditions are such that it would be somewhat
tough to pitch for a growth of that nature. But certainly above
7.5 percent is something that we could safely work towards,"
He also predicted that the rupee, which has fallen 14.8
percent since a 3 percent devaluation last November, will
appreciate and settle around 125 per U.S. dollar as expected
earlier due to expected inflows. On Monday, it was trading
around 129.75 to the U.S. dollar.
"We are seeing some fresh inflows due to come in to the
stock market, property market, and FDI (foreign direct
investment)," he said without elaborating on the numbers.
The governor said he believes it is "pretty realistic" to
think that the rupee could settle around 125 to the dollar.
(Editing by Richard Borsuk)