The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 27 December 2018, decided to maintain policy interest rates at their current levels. Accordingly, the Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) of the Central Bank will remain at 8.00 per cent and 9.00 per cent, respectively. The Board considered current and expected developments in the domestic economy and the domestic financial markets as well as the global economic environment, with the broad aim of stabilising inflation at mid single digit levels in the medium term to enable the economy to achieve its potential growth.

Sri Lanka’s external sector continued to be under pressurein October 2018. The trade deficit widened significantly in October due to a higher growth in import expenditure alongside a marginal growth in exports. However, it is expected that the trend of increasing imports will reduce in the coming months with the lagged impact of recently introduced restrictions on certain import categories. Meanwhile, workers’ remittances recorded a healthy increase in October, while earnings from tourism registered a marginal growth. The financial account witnessed outflows of foreign investments from the government securities market and the Colombo Stock Exchange (CSE).Foreign currency outflows together withimport expenditure exerted pressure on the domestic foreign exchange market. Consequently, the Sri Lanka rupee depreciated by 12.3 per cent in the first ten months of the year.