Purchasing Managers Indices in August 2023 indicated an expansion in Services activities and a softening of the contraction in Manufacturing activities.
Manufacturing PMI recorded an index value of 49.3 in August 2023, reaching closer to the neutral threshold, indicating signs of a recovery in manufacturing activities compared to previous months. Considering the sub-indices, New Orders and Suppliers' Delivery Time increased during the month, while Production and Employment remained contracted.
In response to an invitation from the Financial Intelligence Unit of Sri Lanka, a high-level delegation from the Asia Pacific Group on Money Laundering (APG) visited Sri Lanka to engage with local authorities and provide them with crucial insights regarding the upcoming mutual evaluation of Sri Lanka’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Framework. The international delegation included:
The Treasury bond Exchange Memorandum dated 04 July 2023 (the "Exchange Memorandum") was published by the Ministry of Finance, Economic Stabilization and National Policies with subsequent announcement of the results of the Invitation to Exchange Treasury bonds on 12 September 2023 (terms used herein but otherwise not defined have the meanings given to such terms in the Exchange Memorandum).
Accordingly, outstanding Eligible Bonds for which valid Offers were accepted by the Republic were converted by reference to the Exchange Consideration Ratio into twelve (12) new step-down fixed coupon* Treasury bonds and settled on 14 September 2023 as follows:
The Employees’ Provident Fund (EPF/the Fund) wishes to inform its members that as an eligible participant and with the approval of the Monetary Board of the Central Bank of Sri Lanka, it has submitted an offer to exchange the portfolio of Treasury Bonds of the EPF under the Domestic Debt Optimization (DDO) programme in terms of the invitation made by the Ministry of Finance, Economic Stabilisation and National Policies (MOF) following a Resolution adopted by Parliament.
The Financial Intelligence Unit of Sri Lanka (FIU) published the sanitized report of the 2021/22 National Risk Assessment (NRA) on Money Laundering and Terrorist Financing (ML/TF), which was developed based on the assessment conducted by the FIU of the Central Bank of Sri Lanka (CBSL) together with public and private sector stakeholders. This assessment was aimed at identifying the ML/TF risks in the country. The assessment highlights the most significant ML/TF threats, vulnerabilities, and risks faced by Sri Lanka.
Bimputh Finance PLC (BFP), a Licensed Finance Company under the Finance Business Act, No. 42 of 2011 (FBA) has continuously been violating/contravening provisions of the FBA, several general Directions and Rules that have been issued with the view to achieve the overall objective of financial system stability and also specific directions issued to BFP in order to address the critical financial position of the company. Consequently, the financial condition of BFP had been deteriorating due to deficient capital level, poor asset quality and continuous losses.
Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100)1 decreased to 4.0% in August 2023 from 6.3% in July 2023. The decline in the headline inflation is mostly in line with the projections envisaged by the Central Bank of Sri Lanka (CBSL) in July 2023.
The Food deflation (Y-o-Y) continued for the second consecutive month recording 4.8% in August 2023 from 1.4% in July 2023. Meanwhile, the Non-Food inflation (Y-o-Y) decreased further to 8.7% in August 2023 from 10.5% in July 2023. Monthly change of CCPI recorded at -0.02% in August 2023 due to the combined effect of price decreases of -0.41% observed in the items of Food category and price increases of 0.39% recorded in the items of Non-Food category. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, decreased to 4.6% in August 2023 from 5.9%* in July 2023.
As a result of the policy measures taken thus far, and well anchored inflation expectations, inflation is expected to stabilise around mid-single digit levels over the medium term.
Merchandise trade deficit widened in July 2023 due to the combined impact of relatively low export earnings and high import expenditure, compared to July 2022. However, cumulative trade deficit during January-July 2023 remained significantly low, compared to the corresponding period in 2022.
Workers’ remittances increased notably and earnings from tourism continued to improve in July 2023, over the same period last year.
Foreign investment in the government securities market recorded a net outflow, while the Colombo Stock Exchange recorded net foreign inflows during July 2023.
Gross official reserve level (GOR) recorded at US dollars 3.8 billion by end July 2023.
The Sri Lanka rupee experienced some volatility against the US dollar in July 2023.
The construction industry continued to perform at a subdued level in July 2023, recording a Total Activity Index value of 43.2. As per the respondents, most firms remain hibernated amid the challenging industry environment. However, the gradual decline in material cost had provided a conducive environment for the limited ongoing projects. Further, some temporarily suspended government-funded projects resumed at a modest scale during the month.
The New Orders contracted, yet at a slower rate in July. Many respondents highlighted that tendering opportunities are mostly limited to foreign-funded projects, while private clients are still waiting for further reductions in cost. Moreover, sub-contract openings are also scarce as firms with projects in hand possess extra capacities. Meanwhile, Employment decreased further during the month since firms tend to retain only the key staff. Further, Quantity of Purchases continued to decline during the month as most of the firms are in a wait-and-see stance, only fulfilling the short-term requirements. In the meantime, Suppliers’ Delivery Time broadly remained stable during the month, and some respondents mentioned that supplier credit facilities are also becoming available.
The sentiment amongst the firms towards the next three months broadly remained positive, mainly due to the expected recovery in the economy, the decrease in interest rates and material costs, and current negotiations on the recommencement of suspended governmentfunded projects.
During a protest held by a group of persons, who claimed themselves as representatives of the members of the Employees’ Provident Fund (EPF), today, i.e., on 28th August 2023 near Colombo Fort Railway Station against the potential impact to EPF due to the implementation of the Domestic Debt Optimisation programme (DDO), the said group of persons through the Colombo Fort Police Station requested for a meeting with the officials of the Central Bank of Sri Lanka (CBSL) to discuss the matters pertaining to DDO and EPF. In response to the said request, the Governor of the CBSL, through the officials of the Colombo Fort Police Station, has informed the said group of persons that a meeting will be convened today itself at 2.30 p.m. at the CBSL premises with five persons representing the said group of persons.
