The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 05 July 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) remain at 7.25 per cent and 8.50 per cent, respectively. The Board’s decision is consistent with stabilising inflation at mid-single digit levels in the medium term, thereby contributing to a favourable growth outlook for the Sri Lankan economy.
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The Central Bank of Sri Lanka Maintains Policy Interest Rates at Current Levels
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Extension of the Suspension of Business of Perpetual Treasuries Limited
The Monetary Board of the Central Bank of Sri Lanka, acting in terms of the Regulations made under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance, has decided to extend the suspension of Perpetual Treasuries Limited (PTL) from carrying on the business and activities of a Primary Dealer for a period of six months with effect from 4.30 p.m. on 05th July 2018, in order to continue the investigations being conducted by the Central Bank of Sri Lanka.
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External Sector Performance - April 2018
Sri Lanka’s external sector strengthened in April 2018 with continuous inflows to the financial account of the balance of payments (BOP) despite the mixed performance demonstrated in the current account. Higher inflows to the financial account, particularly with the proceeds of the 12th international sovereign bond (ISB) issuance, project loans and FCBU loans and foreign investment in the Colombo Stock Exchange (CSE) and the government securities market, resulted in gross official reserves reaching the historically highest level of US dollars 9.9 billion as at end April 2018. In terms of the current account, the trade deficit expanded in April 2018 as import expenditure increased at a higher pace while export earnings remained subdued. However, tourist earnings and workers’ remittances continued to record a healthy growth during the month.
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Statement Issued by Dr. Indrajit Coomaraswamy, Governor of the Central Bank of Sri Lanka
In recent days, former Finance Minister Hon Ravi Karunanayake has repeated his allegations against Dr. Nandalal Weerasinghe, Senior Deputy Governor of the Central Bank of Sri Lanka (CBSL).
As the Governor of the CBSL, I want to formally place on record that Dr. Weerasinghe is an outstanding economist who has made a stellar contribution to the work of the Bank during the two years I have spent in this position.
In addition, I am compelled to point out that the former Finance Minister Hon Ravi Karunanayake has not produced any evidence to back up his unfounded allegations.
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The Department of Census and Statistics Compiles the Gross Domestic Product
The sole responsibility of compiling Gross Domestic Product (GDP) estimates is vested with the Department of Census and Statistics (DCS) since 2007. However, the Central Bank of Sri Lanka (CBSL) has observed media statements by interested parties, in relation to the involvement of CBSL in manipulating GDP estimates of the country, misleading the general public.
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Financial Intelligence Unit of Sri Lanka Entered into a Memorandum of Understanding with Securities and Exchange Commission of Sri Lanka
In terms of the provisions of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA), the Financial Intelligence Unit (FIU) of Sri Lanka entered into a Memorandum of Understanding (MOU) with the Securities and Exchange Commission of Sri Lanka (SEC) on June 19, 2018 at the Central Bank of Sri Lanka to establish a framework for sharing information on supervisory findings based on comprehensive risk-based supervision focused on Anti-Money Laundering (AML) /Countering the Financing of Terrorism (CFT) in the Securities Sector. -
Inflation in May 2018
Headline 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 2.1 per cent in May 2018 from 1.6 per cent in April 2018, on year-on-year basis. The increase in the year-on-year inflation in May 2018 was mainly driven by upward price revisions to the items in the Non-food category. The change in the NCPI measured on an annual average basis decreased from 6.1 per cent in April 2018 to 5.7 per cent in May 2018.
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Sri Lanka Purchasing Managers’ Index - May 2018
The Manufacturing Sector PMI recovered in May following the seasonal contraction observed in the previous month and recorded an index value of 60.6 in May with an increase of 15.1 index points from April. The recovery of PMI was largely attributable to the significant increase in production to cater both the new orders received during the month and the uncompleted orders received in April due to the new year holidays, especially in the manufacturing of textiles, wearing apparel, leather and other related products. New Orders, Stock of Purchases and Employment sub-indices also increased during the month. However, the Employment sub-index in manufacturing of textiles, wearing apparel, leather and other related products still remains in the negative territory.
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The International Monetary Fund Releases the Fifth Tranche of US dollars 252 million under the Extended Fund Facility
The Executive Board of the International Monetary Fund (IMF) concluded the 2018 Article IV consultation with Sri Lanka and completed the fourth review of the three-year Extended Fund Facility (EFF), approving the disbursement of the fifth tranche amounting to SDR 177.774 million (approximately US dollars 252 million). The EFF aims at supporting the Balance of Payments and the broad economic reform agenda of the government.
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External Sector Performance - March 2018
The external sector displayed a mixed performance in March 2018. Even though expenditure on imports continued to increase, exports which peaked to historic high levels in March 2018, contributed to a lower trade deficit vis-a-vis the previous two months of the year. Earnings from tourism increased notably in March 2018 continuing the positive trend observed since January 2018. Workers’ remittances rose during the month reversing the decline recorded in February 2018. Meanwhile, the financial account of the Balance of Payments (BOP) experienced some outflows in March, particularly with the withdrawal of foreign investments from the government securities market and the Colombo Stock Exchange (CSE). The level of gross official reserves of the country remained at a healthy level.