The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 17 August 2022, 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 14.50 per cent and 15.50 per cent, respectively. In arriving at this decision, the Board considered the latest model-based projections, which point towards a larger than expected contraction in activity and a faster than expected easing of price pressures, compared to the previous monetary policy review. Contractionary monetary and fiscal policies already in place, alongside the measures to curtail non urgent import expenditure, are expected to result in a notable contraction in credit to the private sector and possible upside risks to unemployment in the near term. The Board was of the view that despite headline inflation is projected to remain elevated in the near term, the policy measures taken by the Central Bank and the Government thus far would help contain any aggregate demand pressures, thereby anchoring inflation expectations, along with the anticipated decline in global commodity prices and its passthrough to domestic prices in the period ahead.
-
The Central Bank of Sri Lanka Maintains Policy Interest Rates at their Current Levels
-
The Appearance of Erroneous News Items referring to Statements made by the Governor of the Central Bank of Sri Lanka on various websites and social media platforms
Sinhala translations of articles construed to be authored by the Governor of the Central Bank of Sri Lanka, Dr. Nandalal Weerasinghe, in English, have been circulating in websites and social media platforms these days.
For example, since of late, there has been numerous instances where articles under the topic “Inflation is not a Problem, but a Solution…..This Economic Crisis may be the best thing that happened to us – says Central Bank Governor” or similar topics have been circulating widely in social media.
-
Relaxation of the Mandatory Conversion Requirement on Service Export Receipts/Proceeds
With the view of encouraging service exporters to repatriate their export proceeds into the country, the Central Bank of Sri Lanka has withdrawn the mandatory requirement to convert service export receipts/proceeds, that are received in Sri Lanka on or after 12 August 2022. The service exporters may use their export proceeds so repatriated to Sri Lanka for the permitted purposes. The mandatory requirement to receive proceeds of service exports to the country within 180 days from the date of provision of services remains unchanged.
-
Sri Lanka Purchasing Managers’ Index - July 2022
Purchasing Managers' Indices for both Manufacturing and Services activities decreased in July 2022.
Manufacturing PMI declined in July 2022, indicating a contraction in manufacturing activities on a month-on-month basis.
Services PMI recorded an index value of 43.0 in July 2022 indicating a contraction in services activities for the fourth consecutive month.
-
Establishment of the Stakeholder Engagement Committee
The Central Bank of Sri Lanka (CBSL), with a view to broadening its engagement with key stakeholders of the economy, established the Stakeholder Engagement Committee (SEC) by replacing the Monetary Policy Consultative Committee (MPCC) and the Financial System Stability Consultative Committee (FSSCC) of the CBSL that were in operation previously. The SEC is chaired by Prof. Sirimal Abeyratne, Professor in Economics, Department of Economics, University of Colombo and comprises the following 17 eminent personalities from the private sector and academia as members.
-
External Sector Performance - June 2022
The merchandise trade balance recorded a surplus in June 2022 for the first time since August 2002, reflecting the impact of historically high monthly export earnings and the continued decline in import expenditure. Earnings from tourism recorded an increase in June 2022 (year-on-year) from the low base, despite the negative sentiments associated with travel advisories and the ongoing shortage of fuel and resultant transportation difficulties. Workers’ remittances moderated in June 2022, compared to May 2022, reflecting an increase of grey market activity of foreign exchange transactions. Foreign investment in the government securities market recorded a marginal net inflow, while that in the Colombo Stock Exchange (CSE) recorded a marginal net outflow during June 2022.
-
Importance of ‘Fair Play’ by all Stakeholders of the Economy in Countering the Current Unprecedented Economic Crisis
The Government and the Central Bank of Sri Lanka (CBSL) have been implementing several measures to ease the burden of the current economic hardships on the people. One major factor that is contributing to the current crisis and the resultant hardships is the lack of foreign exchange liquidity in the banking system. Such shortage of forex liquidity has affected the provision of essential imports, including fuel. To ensure adequate foreign exchange liquidity in the banking system, the CBSL had to impose surrender requirements on export earnings. Further, measures were taken by the Government and the CBSL to discourage foreign exchange outflows, such as imposing restrictions on certain imports and payment terms and introducing margin requirements, while encouraging foreign inflows through the banking system, rather than those being channelled through the grey market.
-
CCPI based headline inflation recorded at 60.8% on year-on-year basis in July 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 60.8% in July 2022 from 54.6% in June 2022. This increase in Y-o-Y inflation was driven by the monthly increases of both Non-Food and Food categories. Accordingly, Food inflation (Y-o-Y) increased to 90.9% in July 2022 from 80.1% in June 2022, while Non-Food inflation (Y-o-Y) increased to 46.5% in July 2022 from 42.4% in June 2022.
-
Reappointment of Mr. Anthony Nihal Fonseka as a member of the Monetary Board of the Central Bank of Sri Lanka for a period of six years
Mr. Anthony Nihal Fonseka has been reappointed as a member of the Monetary Board of the Central Bank of Sri Lanka (CBSL) with effect from 27 July 2022 for a period of six years. Previously, he served on the Monetary Board from July, 2016 to May 2020 and from May 2022 to July 2022. -
NCPI based headline inflation recorded at 58.9% on year-on-year basis in June 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 58.9% in June 2022 from 45.3% in May 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 75.8% in June 2022 from 58.0% in May 2022, while Non-Food inflation (Y-o-Y) increased to 43.6% in June 2022 from 34.2% in May 2022.