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CCPI based headline inflation recorded at 69.8% on year-on-year basis in September 2022

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013=100) increased to 69.8% in September 2022 from 64.3% in August 2022. This increase in Y-o-Y inflation was driven by the monthly increases of both Food and Non-Food categories. Accordingly, Food inflation (Y-o-Y) increased to 94.9% in September 2022 from 93.7% in August 2022, while Non-Food inflation (Y-o-Y) increased to 57.6% in September 2022 from 50.2% in August 2022.

Central Bank of Sri Lanka Co-hosted the 3rd CBSL-ADBI-APAEA Online Macroeconomics Conference

The Central Bank of Sri Lanka co-hosted the CBSL-ADBI-APAEA Online Macroeconomics Conference for the third consecutive year, in collaboration with the Asian Development Bank Institute (ADBI) and the Asia-Pacific Applied Economics Association (APAEA), on 23 September 2022. This year’s theme remained same as the previous year; ‘Emerging Issues for Macroeconomic Stability’.

NCPI based headline inflation recorded at 70.2% on year-on-year basis in August 2022

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100) increased to 70.2% inAugust 2022 from 66.7% in July 2022. This increase in Y-o-Y inflation was mainly driven by the monthly increases of both Food and Non-Food categories. Accordingly, Food inflation (Y-o-Y) increased to 84.6% in August 2022 from 82.5% in July 2022, while Non-Food inflation (Y-o-Y) increased to 57.1% in August 2022 from 52.4% in July 2022.

Monthly change of NCPI recorded at 2.45% in August 2022 due to price increases observed in items of both Food and Non-Food categories which were 0.91% and 1.53%, respectively. Accordingly, within the Food category, increases were observed in prices of fresh fish, eggs, biscuits and fruits. However, prices of dhal, rice and sugar decreased during the month. Further, within the Non-Food category, increases were observed in prices of Housing, Water, Electricity, Gas and Other Fuels (Electricity, Materials for maintenance and Kerosene), Furnishing, Household Equipment and Routine Household Maintenance (Washing soap) and Miscellaneous Goods and Services subcategories during the month. It is noteworthy that Transport (Petrol, Diesel and Bus fare) subcategory recorded a decline during the month.

Sri Lanka Purchasing Managers’ Index - August 2022

Purchasing Managers Indices for both Manufacturing and Services activities increased in August 2022.

Manufacturing PMI recorded an index value of 49.6 in August 2022, up from July, yet at slightly below the neutral threshold level.

Services PMI returned to the growth territory in August 2022, recording an index value of 51.7 after declining for four consecutive months.

Imposition/Collection of Administrative Penalties by the Financial Intelligence Unit (FIU) to Enforce Compliance on Financial Institutions

By virtue of the powers vested under Section 19 (1) read together with Section 19 (2) of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA), financial penalties are imposed on Institutions for non-compliance with the provisions of the FTRA. The penalty may be prescribed taking into consideration the nature and gravity of relevant non- compliance of the Financial Institution.

Accordingly, as Sri Lanka’s regulator for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), the FIU, imposed a penalty as indicated below amounting to Rs. 1.0 million to enforce compliance on Financial Institutions. The money collected as penalties were credited to the Consolidated Fund.

External Sector Performance - July 2022

Earnings from exports increased in July 2022, while import expenditure declined for the fifth consecutive month, on a year-on-year basis. The notable decline in import expenditure in July 2022 reflected the impact of overall moderation of activity amidst forex liquidity strains in the banking system, while the policy measures to curtail non-urgent import expenditure also helped to contain import demand pressures. As a result, the trade deficit recorded a notable contraction in July 2022 over the year, thereby easing stresses in the domestic foreign exchange market. Workers’ remittances increased marginally in July 2022, compared to June 2022, and remained in excess of the trade deficit, thereby supporting the forex liquidity conditions under severe balance of payments pressures. Earnings from tourism recorded an increase in July 2022 (year-on-year) on the low base. Foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded a marginal net inflow during July 2022. The Central Bank continued to provide forex liquidity to finance essential imports, exhausting the usable level of gross official reserves. Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 361 per US dollar during the month.