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Monetary Policy Review - September 2016

According to the Department of Census and Statistics (DCS), the Sri Lankan economy is provisionally estimated to have grown by 2.6 per cent, year-on-year, during the second quarter of 2016 compared to the growth of 7.0 per cent recorded in the same period of 2015. Meanwhile, growth in the first quarter 2016 was revised to 5.2 per cent.

In the second quarter of 2016, Services related activities grew by 4.9 per cent while Industry related activities recorded a moderate expansion of 2.2 per cent. Agriculture related activities, which were affected by adverse weather conditions, recorded a contraction of 5.6 per cent in the second quarter of the year. A combination of improvements in the Purchasing Managers’ Index (PMI) and business confidence as well as favourable base effects in the fourth quarter of 2016 are expected to contribute to a rebounding of growth in the second half of the year.

IMF Staff Concludes Visit to Sri Lanka to Discuss Progress of Economic Program

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

A staff team from the International Monetary Fund (IMF) led by Jaewoo Lee visited Colombo during September 13-23, 2016 to hold discussions on the first review of the Sri Lankan authorities’ economic program that is being supported by a three-year Extended Fund Facility (EFF). The program aims to support the authorities’ ambitious reform agenda to put public finances on a sustainable footing and create space for its social and development program. At the end of the visit Mr. Lee made the following statement:

The FIU Sri Lanka Entered into a Memorandum of Understanding with Suspicious Transaction Reporting Office of Singapore

The Financial Intelligence Unit of the Central Bank of Sri Lanka (FIU - Sri Lanka) entered into a Memorandum of Understanding (MOU) with the Suspicious Transaction Reporting Office of Singapore (STRO) on the basis of reciprocity and in the spirit of cooperation and mutual interest and within the framework of each Authority’s national legislation, to facilitate the exchange of information related to investigations and prosecutions of money laundering and terrorist financing on September 01, 2016. This MOU has been entered into by the FIU – Sri Lanka, in terms of the provisions of the Financial Transactions Reporting Act, No. 6 of 2006.

Inflation in August 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, decreased to 4.5 per cent in August 2016 from 5.8 per cent in July 2016, on year-on-year basis. Both Food and Nonfood categories contributed towards the year-on-year inflation in August 2016.

The change in the NCPI measured on an annual average basis increased to 3.6 per cent in August 2016 from 3.4 per cent in July 2016.