Sri Lanka’s external sector showed a mixed performance in August 2017. Although export earnings increased in August 2017, higher growth in import expenditure resulted in an expansion of the trade deficit. Despite the increase in tourist earnings in August 2017, the decline in workers’ remittances together with the expanded trade deficit dampened the performance of the external current account. However, the financial account of the Balance of Payments (BOP) was supported by the receipt of the second tranche of the foreign currency term financing facility to the government along with continued foreign inflows to the Colombo Stock Exchange (CSE) and the government securities market in August 2017.
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External Sector Performance - August 2017
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IMF Reaches Staff-Level Agreement on the Third Review of Sri Lanka’s Extended Fund Facility
The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the findings so far, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
- The 2018 budget should continue fiscal consolidation, supported by the new Inland Revenue Act.
- Monetary policy should remain vigilant to pressures on inflation and credit growth.
- Upholding the reform momentum is key to addressing vulnerabilities and sustaining inclusive growth.
After constructive discussions with the authorities in Colombo and during the Annual Meetings, an IMF staff team issued the following statement in Washington DC:
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Monetary Policy Review - December 2016
According to the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy is estimated to have grown by 4.1 per cent during the third quarter of 2016 compared to the growth of 5.6 per cent in the corresponding period of the previous year. Services activities grew by 4.7 per cent, while Industry activities grew notably by 6.8 per cent during the third quarter of 2016. However, Agriculture related activities continued to report a contraction, for the second consecutive quarter, by 1.9 per cent, impacted by the adverse weather conditions that prevailed during the third quarter of 2016.
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Dr. Indrajit Coomaraswamy is named Central Bank Governor of the Year, South Asia by Global Capital Markets publication
The Central Bank of Sri Lanka is pleased to announce that Dr. Indrajit Coomaraswamy, Governor Central Bank of Sri Lanka has been named Central Bank Governor of the Year, South Asia, by the popular publication house Global Capital at Global Capital Markets Awards ceremony in Washington DC on 14 October 2017, which coincides with the World Bank-IMF Annual meetings. “GobalCapital is a leading news, opinion and data service for people and institutions working in the international capital markets”
( http;//www.globalcapital.com/about-global-capital ) -
SL Purchasing Managers’ Index Survey - September 2017
The Manufacturing Sector PMI recorded 59.0 in September which is an increase of 4.6 index points compared to August 2017. This indicates that the Manufacturing activties continued to expand in September 2017 at a higher rate compared to August 2017. This expansion was mainly driven by the increase in the Employment sub-index which recovered from the contraction observed in the previous month with the recruitment of new employees. The production and new orders sub-indices expanded at higher rates in September. The Stock of purchases sub-index increased at a slower rate due to the excess stocks level observed in the previous month. Suppliers’ Delivery Time lengthened, albeit at a slower rate compared to previous month.
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IMF Staff Concludes Visit to Sri Lanka to Discuss Progress of Economic Reform Program
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
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External Sector Performance - July 2017
Sri Lanka’s external sector continued to improve with increased exports and inflows to the financial account. However, the trade deficit widened in July 2017 compared to the corresponding month of 2016 due to higher import expenditure amid the increase in export earnings. Tourist earnings declined marginally in July while workers’ remittances increased, reversing its declining trend observed in the last four months. Inflows to the financial account continued to strengthen with net inflows to the government securities market, long term loans to the government, receipt of the third tranche of the Extended Fund Facility (EFF) of the International Monetary Fund (IMF), as well as continued portfolio investment inflows to the Colombo Stock Exchange (CSE).
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Clarification by the Central Bank of Sri Lanka on Misleading News Reports on a Comment made by the Governor
The Central Bank of Sri Lanka (CBSL) has observed media reports highlighting adjustments to the Value-Added Tax (VAT) as the reason for increased inflation in 2017.
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Monetary Policy Review - No. 6 of 2017
Considering developments and outlook in the domestic and international macroeconomic environment, the Monetary Board, at its meeting held on 25 September 2017, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels.
Given below are the key factors that the Monetary Board considered in arriving at the decision.
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Inflation in August 2017
Inflation, as measured by the change in the National Consumer Price Index (NCPI) (2013=100), which is compiled by the Department of Census and Statistics (DCS), increased to 7.9 per cent in August 2017 from 6.3 per cent in July 2017, on year-on-year basis. Both Food and Non-food categories contributed towards the year-on-year inflation in August 2017.
The change in the NCPI measured on an annual average basis increased from 6.2 per cent in July 2017 to 6.5 per cent in August 2017.