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External Sector Performance - March 2018

The external sector displayed a mixed performance in March 2018.  Even though expenditure on imports continued to increase, exports which peaked to historic high levels in March 2018, contributed to a lower trade deficit vis-a-vis the previous two months of the year. Earnings from tourism increased notably in March 2018 continuing the positive trend observed since January 2018. Workers’ remittances rose during the month reversing the decline recorded in February 2018. Meanwhile, the financial account of the Balance of Payments (BOP) experienced some outflows in March, particularly with the withdrawal of foreign investments from the government securities market and the Colombo Stock Exchange (CSE).  The level of gross official reserves of the country remained at a healthy level.

Deshamanya Amarananda Somasiri Jayawardena, Former Governor of the Central Bank, Passes Away

The Central Bank, with deep sorrow, wishes to announce the demise of Deshamanya Amarananda Somasiri Jayawardena, former Governor of the Central Bank of Sri Lanka. He passed away at the age of 82, on the 29th of May, 2018.

Deshamanya A S Jayawardena was the tenth Governor, functioning in this position from November 1995 to June 2004. He joined the Central Bank in 1958 and served in the Secretariat, Establishments and Economic Research Departments before being appointed as Director of Economic Research (1977 – 1980).

He served as Assistant to the Governor and Executive Director during 1980-1981 and also functioned as the Alternate Executive Director of the IMF from 1981 -1986. He served as Deputy Governor from 1986 – 1989 and was the Senior Deputy Governor from 1993 - 1994.

External Debt and Reserves - Need to identify not only borrowings but also the debt repayments in analyzing how gross official reserves were utilized

A misleading news item has been disseminated in relation to Sri Lanka’s foreign reserves and external debt servicing.

The contents of the news item portray a misleading picture of the country’s external position. While stating that around USD 8.9 billion of borrowings by the government were absorbed to Central Bank reserves during 2015-2018, the article provides no consideration on the significant debt repayment effected by utilization of reserves during the period, which the Central Bank is obligated to as the official debt manager of the government.  

Since 2015, the government has serviced external debt of around US$ 7.5 bn as capital and interest payments utilizing external reserves.  Simply put, gross official reserves as at end 2014 amounted to US$ 8.2 bn. If there were no further borrowings or non-borrowed increase of reserves, the external debt servicing of around US$ 7.5 bn would have resulted in gross official reserves depleting to US$ 0.7 bn by now. 

Inflation in April 2018

Headline Inflation, as measured by the change in the National Consumer Price Index (NCPI, 2013=100), which is compiled by the Department of Census and Statistics (DCS), decreased to 1.6 per cent in April 2018, lowest since February 2016, from 2.8 per cent in March 2018 on year-on-year basis. The decline in the year-on-year inflation in April 2018 was mainly driven by the higher base resulted by the increase in prices of the items in the Food category during April 2017.  The change in the NCPI measured on an annual average basis decreased from 6.7 per cent in March 2018 to 6.1 per cent in April 2018.

Payment for Deposit Holders of ETI Finance Limited

This is further to the Press Release dated 02.01.2018 relating to ETI Finance Limited (ETIFL) and Swarnamahal Financial Services PLC (SFSP).

The Monetary Board of the Central Bank of Sri Lanka (CBSL), having considered the critical financial conditions of ETIFL and the possible implications to the financial system, decided to permit and facilitate ETIFL to sell its holding of shares in subsidiary and sub-subsidiary companies and investment properties, based on a proposal submitted by the Board of Directors of ETIFL, for a net amount of USD 75 million subject to compliance with the applicable laws and regulations.  

CBSL Determined to Curb Unwarranted Depreciation of the Rupee

The underlying fundamentals do not warrant the current pressure on the Sri Lanka rupee. Gross external reserves are presently at a healthy USD 9.1 bn and the real effective exchange rate indices indicate that the currency is competitive. 

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