The Central Bank of Sri Lanka today published “Recent Economic Developments: Highlights of 2021 and Prospects for 2022” online. The publication can be downloaded via the Central Bank Website in Sinhala, Tamil and English languages.
An overview of the performance of the Sri Lankan economy in 2021, as reflected in “Recent Economic Developments”, the box articles in chapter 1 and the infographic published therein are given below:
Remittances by Sri Lankans employed abroad have been an important flow of foreign exchange into the country, with an annual average value of over US dollars 7 billion in the past five years. Considering the importance of this steady non-debt inflow, the Government and the Central Bank of Sri Lanka (CBSL) are in the process of taking steps to ensure that remittances reach their full potential in a manner that is beneficial to the worker as well as to the country.
Sri Lanka has embarked on a focused path towards ensuring macro-economic and financial system stability, having faced strong headwinds from the COVID-19 pandemic. The pandemic resulted in a substantial loss of foreign exchange revenues to the country, but unprecedented support provided by the Government and the Central Bank of Sri Lanka (CBSL), from fiscal, monetary and public health aspects, has helped a strong rebound of the economy as well as a considerable recovery in some foreign exchange earning sectors. The tourism sector is also expected to display a notable recovery in the period ahead, and concerted efforts are taken to improve worker remittance inflows through formal channels. Recent tensions in the forex market have also highlighted the need for Sri Lanka to increase its reliance on foreign exchange earnings over time to strengthen the economy, rather than increasing its foreign borrowings which exposes the economy to various types of shocks.
The Central Bank of Sri Lanka (CBSL) has implemented several schemes to assist COVID-19 affected borrowers through Financial Institutions (FIs) supervised by the CBSL. The schemes included extended repayment periods, concessionary rates of interest, working capital loans, debt moratoriums and restructuring/rescheduling of credit facilities for affected borrowers.
These concessions greatly assisted the small and medium enterprises of many affected sectors: tourism, apparel, plantation, information technology, logistic service providers, three-wheeler owners, operators of school vans, lorries, small goods transport vehicles and buses, and private sector employees.
The Writ Application (CA Writ 417/2021) filed by Mr Keerthi Thennekoon (former Governor of the Southern Province) against the appointment of Governor Ajith Nivard Cabraal as the Governor of the Central Bank was dismissed by the Court of Appeal today, on the grounds that the Petitioner has not established a prima facie case.
Another Writ Application against Governor Cabraal’s appointment filed by Mr Ariyawansa Dissanayake (former Presidential candidate) was also withdrawn by the Petitioner last week.
Workers' remittances have been a key pillar of Sri Lanka's foreign currency earnings that has nearly 100 per cent of domestic value addition, providing a substantial cushion for external sector resilience of the country. Workers' remittances have covered around 80 per cent of the annual trade deficit over the past two decades, and strengthening remittances inflows to the country brings several socio-economic benefits including the smooth supply of forex inflows to the formal banking system and the reduction of income and regional disparities.
By virtue of the powers vested under Section 19 (1) read together with section 19 (2) of the Financial Transactions Reporting Act, No. 06 of 2006 (FTRA), financial 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 Financial Institution.
Accordingly, as Sri Lanka’s regulator for Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT), the FIU collected penalties as indicated below, amounting to Rs. 2.0 million in total for the period from 1 July 2021 to 30 September 2021 to enforce compliance on Financial Institutions. The money collected as penalties were credited to the Consolidated Fund.
Headline inflation, as measured by the year-onyear (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013=100), increased to 7.6per cent in October 2021 from 5.7 per cent in September 2021. This was driven by monthly increases of prices of items in both Food and Nonfood categories. Subsequently, Food inflation (Yo-Y) increased to 12.8 per cent in October 2021 from 10.0 per cent in September 2021, while Nonfood inflation (Y-o-Y) increased to 5.4 per cent in October 2021 from 3.8 per cent in September 2021.
The Monetary Board of the Central Bank issued new Rules, as published in the Gazette Extraordinary No. 2251/42 dated 28 October 2021, in respect of repatriation of export proceeds into Sri Lanka and conversion of such export proceeds to Sri Lanka Rupees, repealing the existing Rules issued under the Monetary Law Act, No.58 of 1949. The new Rules are applicable for both exporters of goods and services in Sri Lanka.
The Monetary Board of the Central Bank of Sri Lanka has established an Advisory Committee to examine possible revival options for failed finance companies.
The Committee comprises four (04) eminent experts from the business sector and is chaired by Mr. Dharma Dheerasinghe, Chairman of CBC Finance Ltd., former Chairman of Commercial Bank of Ceylon PLC and former Deputy Governor of the Central Bank of Sri Lanka. The other members are Mr. Sujeewa Mudalige, Managing Partner of PricewaterhouseCoopers; Mr. Tishan Subasinghe, Managing Director of Moore Stephens Consulting (Pvt) Ltd.; and Mr. Thiyagarajah Dharmarajah, Senior Partner (Audit & Assurance) of Amerasekera & Company, Chartered Accountants.
