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CCPI based headline inflation accelerated in June 2024

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) accelerated to 1.7% in June 2024 from 0.9% in May 2024. This acceleration in the headline inflation is broadly in line with the projections of the Central Bank of Sri Lanka (CBSL). Even with this acceleration, inflation remained well below the inflation target of 5%.

Food inflation (Y-o-Y) accelerated to 1.4% in June 2024 from 0.0% in May 2024. Further, Non-Food inflation (Y-o-Y) accelerated to 1.8% in June 2024 from 1.3% in May 2024. On a month-on-month basis, inflation increased marginally after declining for 3 consecutive months. Accordingly, the monthly percentage increase of CCPI was 0.77% in June 2024. Meanwhile, core inflation (Y-o-Y), which reflects the underlying inflation trends in the economy, accelerated to 4.4% in June 2024 from 3.5% in May 2024.

External Sector Performance - May 2024

In May 2024, the external sector was supported by a narrowed trade deficit, higher inflows to the services account and higher workers’ remittances. 

Merchandise trade deficit on Y-o-Y basis narrowed in May 2024, although widened during January-May 2024.

Services sector inflows (excluding tourist earnings) amounted to USD 306 mn in May 2024 compared to USD 265 mn in May 2023. 

Workers’ Remittances amounted to USD 2,624 mn in Jan-May 2024 compared to USD 2,347 mn in JanMay 2023.

Tourist Earnings amounted to USD 1,406 mn during Jan-May 2024 compared to USD 752 mn during Jan-May 2023. 

Foreign investment outflows from the government securities market continued in May 2024.  

Gross Official Reserves stood at USD 5.4 billion at end May 2024, recording over USD 1 billion increase from end 2023. 

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

Foreign investments in CSE recorded a net marginal outflow in May 2024. 

SL Purchasing Managers’ Index (PMI) for Construction Industry – May 2024

Sri Lanka Purchasing Managers’ Index for Construction (PMI – Construction) recorded an index value of 54.5 in May 2024, indicating an improvement in construction activities. Many  construction projects were back on course in May after the extended holidays of the previous month. However, several respondents mentioned that the prevailed adverse weather conditions had dampened the expected improvement.

Implementation of the Banking (Amendment) Act, No 24 of 2024

The Central Bank of Sri Lanka (CBSL) wishes to announce the implementation of the Banking (Amendment) Act, No. 24 of 2024, effective from 15.06.2024. These amendments were formulated with a view to further strengthening the legal and regulatory framework applicable for licensed commercial banks and licensed specialised banks (licensed banks) to enhance the resilience of the banking sector of Sri Lanka.

The Banking Act, which provides for the introduction and operation of a procedure for the licensing of persons carrying on banking business and for the regulation and control of matters relating to the business of banking, was lastly amended in 2006. Therefore, the recent amendments were formulated considering the developments in the current regulatory framework, economic and market developments, the best practices and international standards adopted on prudential requirements to the context of the local banking sector. In addition, the observations and comments of the relevant stakeholders, viz., the banking sector, Panel of Auditors conducting audits of banks, other regulators and authorities were also considered, as appropriate, when drafting the amendments to the Banking Act.

Administrative Penalties imposed by the Financial Intelligence Unit (FIU) on Financial Institutions from 01 January 2024 to 30 April 2024

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 collected penalties as indicated below, amounting to Rs. 3 million in total from 01 January 2024 to 30 April 2024 to enforce compliance on Financial Institutions. The money collected as penalties were credited to the Consolidated Fund.

Appointment of New Deputy Governors of the Central Bank of Sri Lanka

In terms of the provisions in the Central Bank of Sri Lanka Act, No. 16 of 2023, Hon. Minister of Finance, as recommended by the Governing Board, has appointed Mr. A A M Thassim, Assistant Governor and Secretary to the Governing Board, and Mr. J P R Karunaratne, Assistant Governor, as Deputy Governors of the Central Bank of Sri Lanka with effect from 20.06.2024 and 24.06.2024, respectively.