The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 18 January 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. The Board, having noted the reduction in overall market lending rates during 2020, stressed the need for a continued downward adjustment in lending rates to boost economic growth in the absence of demand driven inflationary pressures, particularly considering the significant levels of excess liquidity prevailing in the domestic money market. As announced in November 2020, the Board decided to introduce priority sector lending targets for the micro, small and medium scale enterprises (MSME) sector to support a broadbased economic revival, in consultation with the banking community.

Amidst a decline in earnings from exports, a number of positive developments were observed in the external sector in November 2020, including a lower trade deficit, and a notable increase in workers’ remittances. Merchandise imports continued to decline supported by the continuation of restrictions on non-essential imports and low global oil prices. There was a notable decline in merchandise exports in November compared to previous months due to disturbances to domestic production processes with the second wave of the COVID-19 pandemic. Workers’ remittances continued to record a growth in November as well. In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in November 2020. The level of gross official reserves amounted to US dollars 5.6 billion at end November 2020, while the Sri Lankan rupee depreciated against the US dollar marginally during the month of November 2020.