He added that the country’s fiscal performance was very good at present,

Sri Lanka raised policy rates to 'lean against' any fiscal slippage from a delayed value added tax hike and higher than expected credit expansion with growth also expected to be strong, he added.

Sri Lanka would still grow at 5.0 percent or more after policy rates were hiked 50 basis points to 8.5 percent, he said.

A suspension of value added tax by courts could undermine revenue collections and undermine a 2.0 percent of gross domestic growth correction this year.

Central Bank raised its main interest rates by 50 basis points each on Thursday in a surprise move aimed at curbing stubbornly high credit growth that is adding to concern about inflationary pressures.

Taking into consideration the developments discussed above, the Monetary Board, at its meeting held on 28 July 2016, was of the view that further tightening of monetary policy is required to curb excessive demand in order to pre-empt the escalation of inflationary pressures and to support the balance of payments.

Accordingly, the Monetary Board decided to increase the main policy interest rates of the Central Bank, namely, the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR), by 50 basis points each, to 7.00 per cent and 8.50 per cent, respectively, effective from the close of business on 28 July 2016.