The Monetary Board, at its meeting held on 02 August 2017, was of the view that the current monetary policy stance is appropriate and decided to maintain the policy interest rates of the Central Bank of Sri Lanka at their present levels.

In arriving at the above decision, the Monetary Board took into consideration current and expected developments in the domestic and international macroeconomic environment and the need to maintain inflation at mid-single digit levels over the medium term.

The outlook for global growth appears to be firming according to the latest update of the World Economic Outlook of the International Monetary Fund (IMF) in July 2017. The Sri Lankan economy is expected to record a modest recovery in the forthcoming quarters following the low growth witnessed in the first quarter of 2017. The recovery of the agriculture related activities and the positive performance of the industry and services related activities together with the reinstatement of GSP+ facility are expected to contribute to economic growth.

Sri Lanka’s external sector strengthened with significant inflows to the financial account of the balance of payments (BOP) with proceeds from the 11th international sovereign bond (ISB) issuance and a syndicated loan facility in May 2017. These inflows resulted in an increase in gross official reserves from US dollars 5.0 billion as at end April 2017 to US dollars 6.8 billion as at end May 2017. Investor confidence in the Sri Lankan economy continued to be buoyant with continuous inflows to the government securities market and the Colombo Stock Exchange (CSE). However, the current account of the BOP demonstrated a mixed performance during May with a widening of the trade deficit and a moderation in earnings from tourism and workers’ remittances. Despite exports increasing for the third consecutive month, the higher increase in import expenditure resulted in a further expansion of the trade deficit.