Sri Lanka's economic expansion is likely to be more than the 6.5 percent forecast this year due to rapid growth in infrastructure development and tourism, the Central Bank Governor, Ajith Nivard Cabraal said yesterday (22 April).

The $42 billion economy was originally expected to expand by a four-year high of 6.5 percent this year, from an eight-year low of 3.5 percent in 2009, according to the Central Bank data.

"Indications are that it could go beyond that," Central Bank Governor told Reuters in an interview.

"We expected the takeoff to happen in the second half. But we've seen positive signs emerging in the end of the first quarter. So it is likely we will have a little bit of advance period which can perhaps translate into better numbers."

Rapid activity in infrastructure development and tourism would be the catalyst for more-than-expected growth.

The Central Bank kept its key policy rates unchanged at multi-year lows on Thursday for the fifth straight month to spur growth, but said it was watching strong liquidity in the market, which could create inflationary pressure.

He said the reason for high liquidity was the Central Bank buying dollars from the market to prevent sharp appreciation of the rupee. He said the bank was weighing an increase of the statutory reserve ratio (SRR) of commercial banks.

"Increasing SRR is a good option right now. It seems to be an option more favourable than the policy rates. But still the time has not come for that," he said.

The Governor said the Central Bank would allow the appreciating trend to take place without disturbing the economic activities.

"We will not permit it to appreciate unduly at a pace that will take investors by surprise. But the trend is fairly clear. We will allow a trend to take place. Our intervention is to ensure that the trend takes place in an orderly fashion," the Central Bank Governor said.