Sri Lanka's economic growth for 2012 has been downgraded to 7% from an earlier projected 8%, but inflationary pressures may remain weak, the Central Bank said, amid measures to counter a balance of payments crisis.
The central bank raised policy rates in February, allowed a rupee peg to break in February after it lost more than a quarter of its foreign reserves, amid strong credit growth.
The state also raised energy prices, which will reduce future unproductive credit to state-run energy enterprises.
The Central Bank asked banks to limit credit growth to 18 percent in 2012 from over 34%in 2011.
It added that slower credit growth, higher energy prices, and lower imports, will reduce economic activity this year.