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CCPI based headline inflation eased further in March 2023

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the Colombo Consumer Price Index (CCPI, 2021=100)  decreased to 50.3% in March 2023 from 50.6% in February 2023. The decline in the headline inflation is broadly in line with the disinflation path envisaged by the Central Bank of Sri Lanka (CBSL) in 2023.

The Food inflation (Y-o-Y) decreased to 47.6% in March 2023 from 54.4% in February 2023, whereas the Non-Food inflation (Y-o-Y) increased to 51.7% in March 2023 from 48.8% in February 2023. Monthly change of CCPI recorded at 2.92% in March 2023 due to price increases observed in items of Non-Food category, which was 3.71%. However, the Food category recorded a monthly decline of 0.79%. The core inflation (Y-o-Y), which reflects the underlying inflation in the economy, decreased to 39.1% in March 2023 from 43.6% in February 2023.

External Sector Performance - February 2023

Import expenditure declined notably, compared to the reduction in export earnings in February 2023 (y-o-y), resulting into sizeable moderation in the trade deficit.

Workers’ remittances and earnings from tourism continued to improve in February 2023.

Gross official reserves strengthened further by end February 2023, compared to recent months.

The exchange rate appreciated notably in March 2023 following the greater flexibility that was allowed in the determination of the exchange rate.

The Colombo Stock Exchange (CSE) and foreign investment in the government securities market recorded net inflows during February 2023.

The Extended Fund Facility (EFF) from the International Monetary Fund (IMF) of US dollars 3 billion was approved and the first tranche was disbursed in March 2023.

Statement by Governor and Secretary to the Treasury after the virtual Investor Presentation held on 30.03.2023

On 20th March 2023, the IMF Board approved Sri Lanka's IMF program, unlocking up to $7bn in funding from the IMF and other IFIs. The IMF program provides a clear roadmap in terms of policy implementation and will stabilize the economy of Sri Lanka and allow the country to regain its growth potential and address its economic vulnerabilities. 

Today, we held an investor presentation in order to explain the current macroeconomic situation in Sri Lanka, and outline the key pillars and objectives of the IMF program as well as the next steps with regard to the engagement with creditors. 

Risks of using and investing in Cryptocurrency

Considering the recent public inquiries and the developments observed relating to cryptocurrencies, which are also commonly referred to as “crypto”, the Central Bank of Sri Lanka (CBSL) wishes to reiterate to the public of the significant risks associated with using and investing in cryptocurrency. Cryptocurrency is a type of virtual currency that is generated by private entities and not by a monetary authority of a country. The term ‘cryptocurrency’ refers to a digital representation of value that is implemented using cryptography and Distributed Ledger Technology (DLT) or similar technology. It is observed that crypto-trading is widely promoted by certain entities as a profitable investment. However, recent complaints received by CBSL have shown that members of the public have incurred heavy losses on their crypto-investments and in certain instances have also been subject to financial scams conducted through crypto-related schemes.

IMF Executive Board Approves US$3 Billion Under the Extended Fund Facility (EFF) Arrangement for Sri Lanka

The IMF Board approved a 48-month extended arrangement under the Extended Fund Facility (EFF) of SDR 2.286 billion (about US$3 billion) to support Sri Lanka’s economic policies and reforms. 

The objectives of the EFF-supported program are to restore macroeconomic stability and debt sustainability, safeguarding financial stability, and stepping up structural reforms to unlock Sri Lanka’s growth potential. All program measures are mindful of the need to protect the most vulnerable and improving governance. 

Close collaboration between Sri Lanka and all its creditors will be critical to expedite a debt treatment that will restore debt sustainability consistent with program parameters. 


Sri Lanka Purchasing Managers’ Index - February 2023

Purchasing Managers’ Indices for both Manufacturing and Services activities contracted in February 2023.

Manufacturing PMI recorded an index value of 42.3 in February, indicating a continued setback in manufacturing activities on a month-on-month basis.

Services sector PMI dropped to an index value of 48.7 in February 2023 indicating a deterioration across the services sector.