The external sector exhibited a significant improvement in October 2017, with a notable decline in the trade deficit and continued inflows to the financial account of the Balance of Payment (BOP). Higher export earnings, which recorded a double digit growth for the fourth consecutive month, and a deceleration in import expenditure resulted in a significant year-on-year decline in the trade deficit in October. However, earnings from tourism increased moderately, while workers’ remittances further declined, owing to adverse economic and geopolitical conditions prevailing in the Middle Eastern region. Inflows to the financial account of the BOP continued during the month amidst increased foreign investments in the Colombo Stock Exchange (CSE) and the government securities market.
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External Sector Performance - October 2017
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Monetary Policy Review - No. 8 of 2017
Considering recent macroeconomic developments, the Monetary Board, at its meeting held on 27 December 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. However, the Central Bank will continue to cautiously monitor the developments in the economy and take necessary policy actions, if warranted.
The key sectoral developments considered in arriving at the decision by the Monetary Board are discussed below.
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Proceeds from China Merchant Port Holdings Co. Ltd Received on Account of Handing Over of Operations of Hambantota Port
Subsequent to the agreement signed between Sri Lanka Ports Authority and the China Merchant Port Holdings Co. Ltd., US $ 292.1 mn has been credited to the US Dollar account of Government of Sri Lanka maintained at the Central Bank of Sri Lanka.
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Inflation in November 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), decreased to 8.4 per cent in November 2017 from 8.8 per cent in October 2017, on year-on-year basis.
The change in the NCPI measured on an annual average basis increased from 7.1 per cent in October 2017 to 7.5 per cent in November 2017.
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SL Purchasing Managers’ Index Survey - November 2017
The Manufacturing Sector PMI recorded 58.8 in November which is an increase of 4.0 index points compared to October 2017. This indicates that the Manufacturing activities expanded at a higher pace in November compared to October 2017. This was mainly driven by the New Orders and Production sub-indices owing to the increase in manufacturing of food, beverages and tobacco related activities in line with the seasonal demand. Further, Employment and Stock of Purchases sub-indices also expanded at a higher pace during the month compared to October 2017. Meanwhile, the Suppliers’ Delivery Time sub-index lengthened, albeit at a slower rate, compared to previous month. Overall, all the sub-indices of PMI recorded values above the neutral 50.0 threshold signalling an overall expansion in November 2017.
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Financial Intelligence Unit of Sri Lanka Entered into a Memorandum of Understanding with Sri Lanka Police
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 Sri Lanka Police on December 13, 2017 at the Central Bank of Sri Lanka to share information/intelligence in order to facilitate investigations and prosecutions on money laundering, terrorist financing and other related offences. -
Ban on Willfully Mutiled, Alterated and Defaced Sri Lankan Currency Notes
The Central Bank of Sri Lanka (CBSL) has drawn attention of the general public for implementation of its Clean Note Policy and regulation on the willfully mutilation, alteration or defacement of Sri Lanka currency notes. The Clean Note Policy has been introduced by CBSL aiming at maintaining the quality standards of the currency notes and thereby helping to distinguish between genuine notes and counterfeits. It is also expected through this policy to enhance image of the country and promote the efficiency of processing currency notes.
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SAARCFINANCE Coordinators’ Meeting held in Colombo on 1 September 2016
The Central Bank of Sri Lanka hosted the 24th SAARCFINANCE Coordinators’ Meeting at the Central Bank premises, Colombo, on 1st September 2016. The 24th SAARCFINANCE Coordinators’ Meeting was attended by SAARCFINANCE Coordinators and Focal Points from the Central Banks and Ministries of Finance in the SAARC region.
The broad objective of SAARCFINANCE is to promote cooperation among Central Banks and Ministries of Finance in SAARC Member States to forge closer cooperation on macroeconomic policies of Member States and to share experiences and expertise within the region. -
External Sector Performance - June 2016
Sri Lanka’s external sector performance remained moderate in June 2016 with a widening trade deficit and relatively low growth in workers’ remittances and tourist earnings. The trade deficit which showed gradual improvements in the first four months of the year deteriorated in May and June with weak performance in both exports and imports. Earnings from tourism recorded a low growth in June compared to previous months of the year while growth in workers’ remittances also moderated. However, inflows to the financial account elevated with the receipts of the first tranche of the IMF Extended Fund Facility (IMF-EFF) and a syndicated loan facility. As a result of these inflows to the financial account and developments in the global economy with further rate hikes by the United States Federal Reserve still to materialise, foreign investments in the government securities market rebounded.
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Central Bank of Sri Lanka - 10th International Research Conference
The 10th International Research Conference of the Central Bank of Sri Lanka was held on 08 December 2017 at the John Exter International Conference Hall of the Central Bank. The conference was organised under the theme of “Macroeconomic Policy Reforms towards a Vibrant Future” with the aim of encouraging innovative theoretical and empirical research on current macroeconomic policy issues, while providing a platform for researchers from policy making and academic institutions to share their experiences and views from diverse perspectives.
As in the past, the 10th International Research Conference attracted eminent researchers from renowned universities, research institutions and central banks around the world.