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External Sector Performance - February 2021

The increase in exports to the pre-pandemic levels, the notable increase in workers’ remittances and the relative stability in the domestic foreign exchange market supported Sri Lanka’s external sector in February 2021. The trade deficit in February 2021 broadly remained unchanged at the level reported a year ago. In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded net outflows in February 2021. The SAARCFINANCE swap facility of US dollars 400 million obtained from the Reserve Bank of India in July 2020 was repaid in February 2021 upon maturity. Net inflows to the domestic foreign exchange market eased the pressure on the exchange rate during the month and the regulatory measures enabled the Central Bank to absorb foreign exchange on a net basis, to build up gross official reserves.

Introduction of a Regulatory Framework to Facilitate Foreign Currency Borrowings by Licensed Finance Companies

The Monetary Board of the Central Bank of Sri Lanka (CBSL) issued directions on foreign currency borrowings by Licensed Finance Companies (LFCs) on 9th April 2021 with a view to provide flexibility for LFCs to obtain low-cost funding from foreign sources to support their business expansions. The objectives of these directions are to stabilise any financial volatilities created by the foreign funding exposures of LFCs and provide a risk management framework for such foreign currency borrowings.

Repatriation of Export Proceeds into Sri Lanka

The Monetary Board, having considered the requests made by exporters of goods, has amended the Rule No. 2 of 2021 as published in the Gazette Extraordinary No. 2218/38 dated 09.03.2021 to reflect the following.  

Sri Lanka Purchasing Managers’ Index - March 2021

Indicating a strong revival in manufacturing activities in the country,  the manufacturing PMI reached  a  9-month high  at 67.0 in March 2021. This was largely attributable to the increases observed  in  Production,  New  Orders,  and  Stock  of  Purchases sub-indices.The  significant  increases  in  New  Orders  and  Production  sub-indices,  particularly  in  the  manufacture  of  food  &  beverages  and textile  &  wearing  apparel  sectors,  have  mainly contributed  to  the improvement  in  the  overall  index.  Many  respondents  in  the manufacture  of  food  &  beverages  sector  highlighted  that  they experienced  higher  levels  of  sales  and  production  during  March 2021 ahead of the New Year festival season. Further, respondents from  the  textile  &  wearing  apparel  sector  mentioned  that  they increased  production  during  the  month  to  cover-up  seasonal holidays.