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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;

Inflation in April 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 4.3 per cent in April 2016 from 2.2 per cent in March 2016, on year-on-year basis. Food and Non Alcoholic Beverages; Alcoholic Beverages and Tobacco; Clothing and Footwear; Furnishings, Household Equipment and Routine Household Maintenance; Heath; Transport; Recreation and Culture; Education; Restaurants and Hotels and Miscellaneous Goods and Services sub categories contributed towards the year-on-year inflation in April.

The change in the NCPI measured on an annual average basis increased to 2.6 per cent in April 2016 from 2.4 per cent recorded in March 2016.

Opening of Bank Accounts for the Disaster Relief Fund of the Government of Sri Lanka

The Government of Sri Lanka has opened the following bank accounts at Sampath Bank PLC to facilitate collection of donations from both Sri Lankans and foreign philanthropists to provide relief to victims of floods and landslides which occurred in May 2016.

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