Sri Lanka's central bank on Monday raised its 2006 economic growth forecast to 6.9 percent from 6 percent in April despite escalating violence threatens a truce between the government and the Tamil Tigers.
The central bank announced here Monday that the island country's key policy interest rates have been retained for a further month, the fifth straight month without a change.
The repurchase interest rate and the reverse repurchase rates was kept at 8.75 and 10.25 percent respectively, the bank said.
During the past months this year, although the trade deficit had widened, the growth in remittances from expatriate Sri Lankans had helped containing the current account deficit, said the bank.
On the inflation, the bank said that annual inflation rate based on the 12 month moving average had decreased marginally from 9.6 percent in March to 9.2 percent in April.
However, analysts say the island's economy could be badly hit if hostilities were to resume between the two sides in the north and east of the country.
An upsurge of violence since December last year has heightened fears of war returning for the first time since 2001.
The rebels and the government who met in February to discuss ways to strengthen the Norwegian backed truce failed to meet in Geneva for the second round scheduled for April 24-25.