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Central Bank of Sri Lanka to Function as the Regulatory and Supervisory Authority of Money or Value Transfer Service Providers

Currently, institutions providing money transfer services in Sri Lanka such as banks and non-bank financial institutions, are regulated by the Central Bank of Sri Lanka (CBSL) or other relevant authorities to ensure financial system stability. However, some entities providing similar services operate outside the formal system, potentially disrupting the money transfer system and not being subject to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regulatory framework.

To address this, the Minister of Finance, Economic Stabilization, and National Policies issued the Money or Value Transfer Service (MVTS) Providers Regulations, No. 1 of 2024 dated April 20, 2024, under the provisions of the Payment and Settlement Systems Act, No. 28 of 2005. Accordingly, effective from June 3, 2024, these regulations require all MVTS providers to be registered and be monitored, offering unregistered or unlicensed MVTS providers the opportunity to formalize their operations and engage in the money transfer business through formal channels.

CCPI based headline inflation decelerated in May 2024

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) decelerated to 0.9% in May 2024 from 1.5% in April 2024. This deceleration in the headline inflation is broadly in line with the projections of the Central Bank of Sri Lanka (CBSL).

Prices of the items in the Food category, on year-onyear basis, remained unchanged in May 2024 (i.e., 0.0% Food inflation (Y-o-Y) in May 2024 compared to 2.9% in April 2024). Nevertheless, Non-Food inflation (Y-o-Y) accelerated to 1.3% in May 2024 from 0.9% in April 2024. On a month-on-month basis, inflation continued to decline. Accordingly, monthly change of CCPI recorded -0.57% in May 2024 due to the price decreases of 0.37% observed in the items of Food category and the price decreases of 0.20% observed in the items of Non-Food category. Meanwhile, core inflation (Y-o-Y), which reflects the underlying inflation trends in the economy, accelerated marginally to 3.5% in May 2024 from 3.4% in April 2024.

Sri Lanka Purchasing Managers’ Index (Construction) - April 2024

Following the seasonal pattern where activities across many sectors slowdown during the traditional new year celebrations, Sri Lanka Purchasing Managers’ Index for Construction (PMI - Construction) decreased to an index value of 31.9 in April 2024. This indicates a contraction in construction activities compared to the previous month. As per the respondents, most construction sites were temporarily closed during the month due to the extended new year holidays, leading to this month-on-month decline.

External Sector Performance - April 2024

Exports increased more than imports (y-o-y), reducing the trade deficit in April 2024. However, cumulative trade deficit for Jan-Apr 2024 widened.

The momentum in tourism continues, though tourist arrivals slowed in April 2024 in line with the seasonal pattern.

Inflows to the other services sectors also remained strong in the first four months of 2024.

Workers’ remittances continued to contribute notably to the external current account and forex market liquidity.

Foreign investment outflows from the government securities (G-Sec) market continued in April 2024.

Gross Official Reserves stood at US$ 5.5 billion at end April 2024, recording over US$ 1 billion increase from end 2023.

The Sri Lanka rupee remained appreciated during the year up to end May 2024.

The Central Bank of Sri Lanka Maintains Policy Interest Rates at their Current Levels

The Monetary Policy Board of the Central Bank of Sri Lanka, at its meeting held on 27 May 2024, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 8.50 per cent and 9.50 per cent, respectively. The Board arrived at this decision after carefully assessing the current and expected macroeconomic developments and possible risks on the domestic and global fronts with a view to maintaining inflation at the targeted level of 5 per cent over the medium term while supporting the economy to reach its potential. While the medium term inflation outlook remains compatible with the current level of policy interest rates and inflation expectations are well anchored, the Board observed the need for a further reduction in market lending interest rates in line with policy interest rates and other benchmark interest rates, which is imperative for the easing of domestic monetary conditions and domestic economic recovery.

Central Bank Launches Financial Literacy Roadmap of Sri Lanka 2024-2028

Today, on May 21, 2024, the Central Bank of Sri Lanka launched the Financial Literacy Roadmap of Sri Lanka, marking a significant step towards enhancing the financial capabilities of Sri Lankans. This Roadmap, a cornerstone of Sri Lanka's National Financial Inclusion Strategy (NFIS), offers evidence-based guidance to all stakeholders engaged in financial literacy initiatives, aligning them towards a common objective: improving the financial behaviour of Sri Lankans and bolstering their financial resilience. Developed through collaborative efforts among various stakeholders, led by the Central Bank through the NFIS Secretariat under the Regional Development Department, the Roadmap sets out to foster financial inclusion, enhance consumer protection, and fortify financial stability.