The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 19 May 2021, decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank at their current levels of 4.50 per cent and 5.50 per cent, respectively. The Board arrived at this decision after carefully considering the macroeconomic conditions and expected developments on the domestic and global fronts. In the context of the prevailing low inflation environment and well anchored inflation expectations, and the renewed challenges posed by the third wave of the COVID-19 pandemic, the Board remains committed to maintaining the current accommodative monetary policy stance to support the sustained revival of the economy.

Sri Lanka’s external sector showed a mixed performance in March 2021 with a widened trade deficit on the one hand, and a healthy growth in workers’ remittances and a slight pickup in the tourism sector on the other. The deficit in the trade account widened in March 2021, for the first time since April 2020. Both exports and imports were significantly higher in March 2021, compared to March 2020 as well as February 2021. However, workers’ remittances grew steadily, and the tourism sector continued the recovery process, albeit at a very slow pace. In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) continued to record marginal net outflows in March 2021 as well. The Sri Lankan rupee depreciated against the US dollar during the month, partly reflecting the seasonal demand for imports. However, mainly supported by the regulatory measures that were in place till mid-March, the Central Bank absorbed foreign exchange on a net basis during the month, to strengthen the gross official reserve position.