The external sector continued its positive momentum in October 2024, supported by robust inflows to the current account, resulting in an increase in reserves and an appreciation of the Sri Lanka rupee.
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External Sector Performance - October 2024
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CCPI-based headline inflation continued to remain in the negative territory in November 2024
In line with the Central Bank’s near term projections, headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100)1 remained in the negative territory for the third consecutive month, recording a deflation of 2.1% in November 2024 compared to the deflation of 0.8% in October 2024.
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SL Purchasing Managers’ Index (PMI) for Construction Industry – October 2024
Sri Lanka Purchasing Managers’ Index for Construction (PMI - Construction) rebounded in October 2024, recording a Total Activity Index value of 54.3. Many respondents mentioned that the operations in construction projects regained momentum in October, following the resolution of election-related uncertainties.
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The Central Bank of Sri Lanka introduces the Overnight Policy Rate and further eases its monetary policy stance
The Monetary Policy Board of the Central Bank of Sri Lanka, at its meeting held on 26 November 2024, decided to further ease the monetary policy stance and set the newly introduced Overnight Policy Rate (OPR) at 8.00 per cent. With this change, the effective reduction in the policy interest rate would be around 50 basis points from the current level of the Average Weighted Call Money Rate (AWCMR), which continues to serve as the operating target of the Flexible Inflation Targeting ( FIT) framework.
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The Central Bank of Sri Lanka implements a Single Policy Interest Rate Mechanism by Introducing the Overnight Policy Rate
As announced in the Central Bank’s Annual Policy Statement in January 2024 and the subsequent announcement in September 2024 of the planned implementation of the single policy interest rate mechanism, the Monetary Policy Board of the Central Bank of Sri Lanka decided to implement a single policy interest rate mechanism transitioning from its dual policy interest rate mechanism, with effect from 27 November 2024. This marks another significant improvement in the Flexible Inflation Targeting (FIT) framework implemented by the Central Bank. Accordingly, the Central Bank introduces the Overnight Policy Rate (OPR), as its primary monetary policy tool to signal and operationalise its monetary policy stance. The OPR will be periodically reviewed and adjusted as needed by the Central Bank to indicate and communicate a change in its monetary policy stance. This transition is expected to enhance the efficiency and effectiveness of monetary policy signalling and transmission to the financial markets and the broader economy.
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Administrative Penalties imposed by the Financial Intelligence Unit (FIU) on Reporting Institutions from May to October 2024
By virtue of the powers vested under Section 19 (1) read together with section 19 (2) of the Financial Transactions Reporting Act, No. 6 of 2006 (FTRA), penalties are imposed on Institutions for non-compliance with the provisions of the FTRA. The penalty may be prescribed taking into consideration the nature and gravity of relevant non-compliance of the Institutions.
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IMF Reaches Staff-Level Agreement on the Third Review under Sri Lanka’s Extended Fund Facility Arrangement
IMF staff and the Sri Lankan authorities have reached staff-level agreement on economic policies to conclude the third review of Sri Lanka’s economic reform program supported by the IMF’s Extended Fund Facility (EFF). Once the review is approved by IMF Management and completed by the IMF Executive Board, Sri Lanka will have access to about US$333 million in financing.
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SL Purchasing Managers’ Index (PMI) – October 2024
Purchasing Managers’ Indices indicate expansions in both Manufacturing and Services activities in October 2024.
Sri Lanka Purchasing Managers’ Index for Manufacturing (PMI – Manufacturing) increased to 58.1 in October 2024, indicating a further expansion in manufacturing activities. This improvement was mainly driven by the seasonal demand, with positive contributions from all the sub-indices.
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Financial Intelligence Unit of Sri Lanka entered into a Memorandum of Understanding with the National Secretariat for Non-Governmental Organizations
The Financial Intelligence Unit (FIU) of Sri Lanka entered into a Memorandum of Understanding (MOU) with the National Secretariat for Non-Governmental Organizations on November 04, 2024 at the Central Bank of Sri Lanka (CBSL) to exchange information on investigations and prosecutions of Money Laundering (ML), Terrorist Financing (TF) and related crimes and of any persons connected thereto. This MOU has been entered into by the FIU, in terms of the provisions of the Financial Transactions Reporting Act, No. 6 of 2006.
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CCPI based headline inflation remained in the negative territory in October 2024
In line with the Central Bank’s near term projections, headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100) remained in the negative territory for the second consecutive month, recording a deflation of 0.8% in October 2024 compared to 0.5% in September 2024.