The Employees’ Provident Fund (EPF) managed by the Monetary Board is Sri Lanka’s largest superannuation fund. It maintains its investment portfolio with the long-term objective of maximizing the returns to its members while preserving the value of the Fund. It operates within certain given risk parameters and has invested 94 per cent of its funds in Government securities and the balance in listed and unlisted equities, corporate debentures, trust certificates and other money market instruments. Funds are invested in a diversified portfolio, across eligible asset classes as given in the Monetary Board approved Strategic Asset Allocation subject to stipulated limits. The market value of the EPF investment portfolio as at 31.12.2020 stood at Rs. 3,243 billion.
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Value of EPF’s Listed Equity Portfolio as at end 2021 records a market value of Rs. 112 billion, against cost of Rs. 84 billion: an increase of Rs. 28 billion
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Unwarranted Rating Action by S&P amid Arrangements to settle ISB Maturity in January 2022
The Government of Sri Lanka (GOSL) is perturbed over today’s announcement by S&P Global Ratings, at a time when the GOSL has diligently lined up adequate funds to repay its maturing foreign debt liabilities and its repeated assurances over the strong commitment to oblige its debt service payments, including the International Sovereign Bond (ISB) maturing on 18 January 2022.
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Clarification on the Composition of the Official Reserve Position
International reserve management of a central bank is a dynamic and technical process which is usually designed to ensure that a country’s foreign assets are readily available and controlled to achieve a defined range of objectives. Accordingly, the adoption of appropriate reserve management policies relating to the asset composition, currency mix, liquidity needs, tenor, profitability, safety, etc. of investment instruments could vary from country to country and would depend on the country-specific circumstances and economic priorities.
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Repatriation and Conversion of Export Proceeds and the Incentive Scheme to attract Higher Workers’ Remittances
Recent rules issued by the Central Bank of Sri Lanka (CBSL) in respect of repatriation and conversion of export proceeds to Sri Lanka Rupees (LKR) have been misinterpreted by certain parties with vested interests. In particular, unfounded speculation has been mischievously spread that the CBSL rules require converting the entirety of workers’ remittances forcibly into LKR upon the receipt of such foreign exchange funds by the Licensed Banks. Rules on conversion of export proceeds DO NOT apply to workers’ remittances. Migrant workers who channel their earnings through Licensed Banks and other formal channels may hold such funds in foreign exchange at any commercial bank. Accordingly, it is NOT mandatory for Sri Lankans working abroad to convert their remittances into LKR.
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Extension of the Suspension of Business of Perpetual Treasuries Limited
The Monetary Board of the Central Bank of Sri Lanka, acting in terms of the Regulations made under the Registered Stock and Securities Ordinance and the Local Treasury Bills Ordinance, has decided to extend the suspension of Perpetual Treasuries Limited (PTL) from carrying on the business and activities of a Primary Dealer for a further period of six months with effect from 4.30 p.m. on 05th January 2022, in order to continue the investigations being conducted by the Central Bank of Sri Lanka.
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Inflation in December 2021 - CCPI
Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2013=100), increased to 12.1 per cent in December 2021 from 9.9 per cent in November 2021. Meanwhile, on an annual average basis, the CCPI increased to 6.0 per cent in December 2021 from 5.3 per cent in November 2021. An in-depth analysis of the key drivers of current inflation suggests that a large component of inflation is driven by supply side factors. A detailed explanation in this regard will be published by the Central Bank shortly.
Inflation was driven by monthly increases of prices of items in both Food and Non-food categories. Subsequently, Food inflation (Y-o-Y) increased to 22.1 per cent in December 2021 from 17.5 per cent in November 2021, while Non-food inflation (Y-o-Y) increased to 7.5 per cent in December 2021 from 6.4 per cent in November 2021.
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Realisation of Expected Foreign Currency Inflows and the Official Reserves Position
The Central Bank of Sri Lanka wishes to inform the general public that (as announced on 22 December 2021) expected foreign currency inflows are forthcoming and with the receipt of recent inflows, the official reserves position has now reached around US dollars 3.1 billion, and is expected to remain at such level by end of 2021, as well. In addition, as articulated in the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability, foreign currency inflows in connection with several other facilities that are under negotiation at present, are expected to be realised in the early part of January 2022.
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Extending Additional Incentives for Inward Workers’ Remittances
The Central Bank of Sri Lanka (CBSL), having considered the requests made by Sri Lankans working abroad, has decided to continue the payment of additional Rs. 8.00 per US dollar for worker remittances, paid in addition to the incentive of Rs. 2.00 per US dollar under “Incentive Scheme on Inward Workers’ Remittances”, for such workers’ remittances channelled through Licensed Banks and other formal channels and converted into Sri Lankan rupees, until 31.01.2022. The decision to continue this additional incentive of Rs. 10.00 per US dollar is in response to the favourable developments observed in workers’ remittances so far during December 2021.
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Expected Foreign Exchange Inflows and the Official Reserve Position
The Central Bank of Sri Lanka wishes to inform the general public that the measures being taken at present will ensure that by end of 2021 official reserves will remain above US dollars 3 billion. Despite the headwinds of the economic impact of COVID-19 and challenges posed by adverse developments in the external sector, the Sri Lankan economy showed resilience throughout 2021. Also, Sri Lanka successfully met its debt obligations by repaying foreign loans, including the payments of the International Sovereign Bonds. Since the beginning of the year both the Central Bank and the Government have been actively pursuing possible avenues to replenish official reserves, with an emphasis on encouraging non-debt flows, so that the existing foreign debt could be managed in a sustainable manner.
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Sri Lanka Prosperity Index - 2020
Sri Lanka Prosperity Index (SLPI), marginally increased to 0.786 in 2020 compared to 0.783 recorded in 2019. The ‘Well-being of the People’ sub-index improved amidst the COVID-19 pandemic, while decreases were observed in ‘Economy and Business Climate’ and ‘Socio-Economic Infrastructure’ sub-indices, during the year.
Improvements to healthcare facilities and more opportunities created for higher education indicated by an increase in the quota of students enrolled for the state universities, have contributed to the increase in Well-being of the People sub-index. In addition, enhanced quality of air and cleanliness of environment derived as side effects of declined industrial activities, reduced vehicle emission and limited mobility of people during the pandemic were also identified as key determinants for the increase recorded within the sub-index.