The Central Bank of Sri Lanka today published “Recent Economic Developments: Highlights of 2019 and Prospects for 2020” on-line. The publication can be downloaded via the CBSL website in Sinhala, Tamil and English languages.
An overview of the performance of the Sri Lankan economy in 2019, as reflected in “Recent Economic Developments”, is given below:
Sri Lanka successfully completed the sixth review, enabling the next disbursement of supporting funds.
Sustaining policy discipline remains critical to strengthen resilience and support strong and inclusive growth.
Mobilizing revenue will be central to place public debt on a downward path while preserving space for social and investment spending.
The Finance Company PLC (TFC), a Finance Company licensed under the Finance Business Act No. 42 of 2011 (FBA) was severely impacted by the failure of a number of financial institutions within the Ceylinco Group in 2008. Since then the financial status of the company deteriorated gradually, leading to a severe liquidity crisis. Although, several efforts were made to identify prospective investors and to restructure the company, such efforts have not materialized to a satisfactory level yet.
Headline inflation as measured by the year-on-year change in the National Consumer Price Index (NCPI, 2013=100) increased to 5.0 per cent in September 2019 from 3.4 per cent in August 2019. The monthly increases of prices of items in both Food and Non-food categories contributed to this increase as reflected in year-on-year Food and Non-food inflation recording 4.9 per cent and 5.1 per cent respectively in September 2019. In addition, the low base that prevailed in the corresponding month of the previous year also contributed for this increase.
The Financial Action Task Force (FATF), the global policy setter on Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), has delisted Sri Lanka from FATF’s Compliance Document which is more commonly identified as “the Grey List”. The decision was taken at the FATF Plenary held during 13-18 October 2019 in Paris.
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 an agreement with INTERPOL National Central Bureau for Sri Lanka (NCB Colombo) on October 11, 2019 at the Central Bank of Sri Lanka to obtain direct access to the INTERPOL Information System.
Manufacturing activities expanded at a slower rate in September 2019, recording an index value of 54.7 which is a decrease of 1.9 index points, compared to August 2019. This slowdown in manufacturing PMI was mainly driven by the slowdown in Production and New Orders during the month of September. Slowdown in Production could be observed, especially in manufacturing of food & beverages and textiles & wearing apparel sectors. Although the New Orders and Production expanded at a slower rate, the Stock of Purchases was increased significantly with the anticipation of high demand in future especially in manufacturing of food & beverages sector.
The trade deficit contracted in August 2019 as the decline in imports continued while the dip in exports in the previous month has largely recovered. Import expenditure recorded a decline of 16.6 per cent (year-on-year) and export earnings declined fractionally by 0.4 per cent (year-on-year) in August 2019, mainly due to the lower prices of major export categories.
The trade deficit fell to US dollars 540 million in August 2019 compared to the deficit of US dollars 717 million recorded in July 2019.
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 10 October 2019, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 7.00 per cent and 8.00 per cent, respectively. The Board arrived at this decision following a careful analysis of current and expected developments in the domestic economy and the financial market as well as the global economy. The decision of the Monetary Board is consistent with the aim of maintaining inflation in the desired 4-6 per cent range while supporting economic growth to reach its potential over the medium term.
The Central Bank of Sri Lanka co-hosted the 10th Asia Cash Cycle Seminar – 2019 with Currency Research held during 23rd – 26th September 2019 at the Shangri-La Hotel, Colombo. The Cash Cycle Seminar formally known as International Commercial Cash Operations Seminar (ICCOS) is a premier global event for stakeholders of commercial cash management, distribution and circulation. Sri Lanka was the first South Asian nation to conduct this seminar in its 24-year old history.
