Contributed by both food and non-food inflation, headline inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), increased to 5.5 per cent in January 2017 from 4.5 per cent in December 2016. Core inflation, based on CCPI, also accelerated to 7.0 per cent in January 2017 from 5.8 per cent in December 2016. Headline inflation and core inflation, based on the National Consumer Price Index (NCPI, 2013=100), which is available with a time lag, also reflected an upward trend in December 2016, recording 4.2 per cent and 6.7 per cent, respectively, on a year-on-year basis.
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Monetary Policy Review: No. 1 – 2017
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External Sector Performance – October 2016
Sri Lanka’s external sector recorded a modest performance in October 2016 with a deterioration in the trade deficit amidst continued growth in tourist earnings. The trade deficit widened in October as a result of higher import expenditure despite a marginal growth in export earnings. The significant increase in import expenditure in October 2016 was primarily due to the import of a dredger vessel for the Port City construction project. Meanwhile, workers’ remittances were marginally higher while a healthy growth was observed in earnings from tourism during October 2016. Although inflows to the Colombo Stock Exchange (CSE) and long term loan proceeds to the government supported the financial account of the Balance of Payments (BOP), the government securities market witnessed a net outflow during October 2016.
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Inflation in December 2016
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, increased marginally to 4.2 per cent in December 2016 from 4.1 per cent in November 2016, on year-on-year basis. Both Food and Non-food categories contributed towards the year-on-year inflation in December 2016.
The change in the NCPI measured on an annual average basis remained unchanged from last month at 4.0 per cent in December 2016.
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A Commemorative Coin to mark the 100th Anniversary of Visakha Vidyalaya, Colombo 5
The Central Bank of Sri Lanka (CBSL) issued an uncirculated silver commemorative coin with a face value of Rs. 2000 to mark the 100th Anniversary of Visakha Vidyalaya, Colombo 05 in recognition of its contribution to the nation as a premier school in the country.
The first coin was officially presented to His Excellency the President Maithripala Sirisena by Dr.Indrajit Coomaraswamy, Governor of CBSL, at the ceremony held at the Jeremias Dias Hall of Visakha Vidyalaya, Colombo 05 on 23.01.2017.
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Statement issued by the Monetary Board on measures taken with respect to the Employees Provident Fund
There have been several media reports recently raising concerns with respect to the Employees’ Provident Fund (EPF).
An internal examination is currently underway under the direction of the Monetary Board on transactions of EPF in Government securities during 2015 and 2016. The law enforcement authorities have also been requested to carry out an external independent investigation into the issuance of Government securities in 2015 and 2016 and related matters, as it involves examining internal operations carried out by the staff of the Central Bank.
With regard to the operations of the EPF, the Monetary Board, during the past six months, has taken several measures to strengthen the decision making process with respect to investments. These serve to safeguard the interests of the members of the EPF.
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Sri Lanka Purchasing Managers' Index Survey - December 2016
The Manufacturing sector PMI was 58.3 in December indicating that the manufacturing activities continued to expand in December 2016.
The Services Sector PMI increased marginally to 59.8 index points in December from 59.7 index points in November 2016.
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External Sector Performance – September 2016
Sri Lanka’s external sector performance improved in September 2016 with a contraction in the trade deficit and continued growth in tourist earnings. The trade deficit in the month of September narrowed as a result of the increase in export earnings together with a reduction in import expenditure. Although worker’s remittances recorded a marginal decline, earnings from tourism increased during the month in comparison to that of September 2015. Furthermore, foreign investments at the CSE and government securities market as well as the long term loan inflows to the government supported to strengthen the financial account during September 2016.
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Financial Intelligence Unit of Sri Lanka Entered into a Memorandum of Understanding with Department for Registration of Persons
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 Department for Registration of Persons on January 11, 2017 at the Central Bank of Sri Lanka to receive information in order to facilitate investigations and prosecutions on money laundering and terrorist financing. Mr. P Viyani Gunathilake, Commissioner General, Department for Registration of Persons and Mr. H. Amarathunga, Director, FIU signed the MOU on behalf of the respective institutions in the presence of Dr. Indrajit Coomaraswamy, the Governor of the Central Bank of Sri Lanka, who is also the Chairman of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) National Coordinating Committee.
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External Sector Performance – February 2017
Sri Lanka’s external sector remained subdued with a widening of the trade deficit, a moderation in tourist earnings and a modest growth in workers’ remittances in February 2017. A considerable widening in the trade deficit was observed in February with a decline in exports amidst increased imports mainly due to higher imports of fuel and rice. Earnings from tourism dipped with a marginal decline in tourist arrivals during the month, which could partly be attributed to the day time closure of the Bandaranayke International Airport (BIA) for resurfacing of the runway. The growth in workers’ remittances in February remained below the expected level. Further, the financial account was adversely affected by significant outflows from the government securities market during the month.
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External Sector Performance - March 2017
Reversing the declining trend observed during the last two months, earnings from exports increased by 9.8 per cent (year-on-year) in March 2017. However, the trade deficit widened in March 2017 compared to the corresponding month of 2016 as the increase in export earnings was offset by the higher increase in import expenditure. Tourist earnings declined in March 2017, as in the previous month, with the partial closure of the Bandaranaike International Airport (BIA) for resurfacing of the runway. Meanwhile, workers’ remittances also recorded a decline in March 2017. In the financial account, foreign inflows to the Colombo Stock Exchange (CSE) continued to record a net inflow while a reversal of trend in net outflows by foreign investors was observed in the government securities market with marginal net inflows during the month.