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A Statement from the Governor of the Central Bank of Sri Lanka

The Governor of the Central Bank of Sri Lanka Mr Arjuna Mahendran informed the Monetary Board at its meeting held on Friday, 24th June, 2016 that he would not be seeking re-appointment as Governor of the Central Bank of Sri Lanka when his term finishes on Thursday, 30th June, 2016 until the Parliamentary Committee on Public Enterprises makes its findings known on issues related to the issuance of Treasury Bonds in the years 2015 and 2016.

Inflation in May 2016

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, increased to 5.3 per cent in May 2016 from 4.3 per cent in April 2016, on year-on-year basis. Both Food and all Nonfood categories except for the Housing, Water, Electricity, Gas, and Other Fuels sub-category contributed towards the increase in year-on-year inflation.

The change in the NCPI measured on an annual average basis increased to 2.7 per cent in May 2016 from 2.6 per cent in April 2016.

External Sector Performance - February 2016

Sri Lanka’s external sector showed a modest performance during the month of February 2016 as the trade deficit contracted and foreign currency inflows in the form of tourist earnings and workers’ remittances continued to record a steady pace of growth. Despite the decline in earnings from exports during the month, the larger decline in expenditure on fuel imports, food and beverages and transport equipment resulted in the contraction of the trade deficit. However, the government securities market and the Colombo Stock Exchange recorded net outflows during the period.


Clarification Regarding False Information Published in the Media About Expenses Incurred by the Governor of the Central Bank of Sri Lanka

It has been reported in the media that allegations had been made by members of the Parliamentary opposition that the Governor of the Central Bank has misused public funds.

The CBSL wishes to state that neither the Governor nor any officer of the CBSL has used public money for personal expenses, or misused public funds in any manner whatsoever. The expenses relating to all official duties and events attended by the Governor and CBSL officials both locally and internationally are borne by the Central Bank of Sri Lanka, similar to the general practice of any other Ministry or Department.

IMF Approves USD 1.5 Billion Extended Fund Facility for Sri Lanka

On 03 June 2016, the Executive Board of the International Monetary Fund (IMF) approved a three year Extended Fund Facility (EFF) of SDR 1.1 billion (approximately USD 1.5 billion) for Sri Lanka to support the balance of payments (BOP) position and in support of the government’s economic reform agenda. This amount is equivalent to 185 per cent of the country’s current quota with the IMF. The first tranche under the EFF amounting to SDR 119.9 million (approximately USD 168.1 million) will be made available to Sri Lanka immediately. The remaining amount will be disbursed in six tranches over a period of three years, with the final tranche is expected to be disbursed in April 2019. The interest rate applicable on the EFF, the basic rate of charge is equivalent to the SDR interest rate, which currently stands at 0.05 per cent per annum, plus 100 basis points. Hence, the interest rate of the EFF facility is significantly lower than the prevailing market rates. The IMF is expected to conduct regular reviews of the country’s economic performance commencing November 2016.

Statement of the Monetary Board on Treasury Bond Auctions

This refers to the recent articles and discussions relating to the Treasury bond auctions that took place during the latter part of March 2016, where allegations of lack of transparency were made with regard to the process that was followed. Attention of the public is drawn to the fact that the process followed was similar to what has been in practice since February 2015 when a complete market based mechanism was introduced in auctioning of Treasury bills and bonds.

The Monetary Board noted the large resource needs of the Government. Further, in the context of Monetary Policy actions, mainly the upward adjustment of the Statutory Reserve Requirement (SRR) at the beginning of the year and the subsequent upward adjustment of the policy interest rates, had resulted in an increase in yield for Treasury bills and Treasury bonds.

Given the existing and emerging financial needs of the Government, the Monetary Board has recommended;