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.

Purchasing Managers’ Indices indicate a contraction in Manufacturing activities and an expansion in Services activities in April 2024

Sri Lanka Purchasing Managers’ Index for Manufacturing (PMI – Manufacturing) recorded an index value of 42.0 in April 2024, indicating a contraction in manufacturing activities following the seasonal pattern. New Orders, Production, Employment and Stock of Purchases sub-indices declined during the month, resulting in an overall decline in the index.

Sri Lanka Purchasing Managers’ Index for Services (PMI – Services) indicated a slower expansion in services activities in April 2024 as reflected by the Business Activity Index, which recorded an index value of 56.7.

The merchandise trade deficit narrowed in March 2024, (year-on-year), supported by a notable improvement in export earnings, the highest earnings recorded since August 2022.

The services sector also recorded a notable net inflow in March 2024 mainly from tourism, while sizeable inflows were recorded in terms of sea transport (freight) services as well.

Workers’ remittances remained elevated in March 2024 in line with the seasonal trend.

Foreign investments in the Colombo Stock Exchange (CSE) and the government securities market recorded monthly net outflows in March 2024.

Sri Lanka Purchasing Managers’ Index for Construction (PMI – Construction) indicates an expansion in construction activities in March, as reflected by the Total Activity Index, which recorded an index value of 55.9. This is the third consecutive month that the index remained above the neutral threshold, denoting a steady improvement in construction activities.