Business

Central Bank of Sri Lanka adopts further policy measures to strengthen macroeconomic stability

Published

4 years ago

2022/01/21

Sahan Weerasooriya

Economic activity is expected to record a gradual recovery following a temporary setback

Monetary Policy Review: No. 01 – January 2022

As per the data released by the Department of Census and Statistics, domestic economic activity that was disrupted with the outbreak of the third wave of the COVID-19 pandemic and related mitigative measures is estimated to have contracted by 1.5 per cent, year-on-year, during the third quarter of 2021. However, economic activity towards the latter part of 2021 appears to have gathered momentum as several leading indicators point towards activity returning to normalcy along with the successful vaccination drive of the Government. Accordingly, the economy is expected to have recorded a growth of around 4.0 per cent in 2021.

External sector remains resilient amidst heightened challenges

With the normalisation of global economic activity, a notable improvement in export performance was observed, with monthly exports remaining in excess of US dollars 1 billion, consecutively since June 2021. Meanwhile, expenditure on imports increased significantly, partly reflecting the increased international prices, the demand for intermediate goods, and a more than expected demand for consumer goods. The increase in imports was also underpinned by the availability of low cost credit, which led the trade deficit to widen to pre-pandemic levels in 2021. Meanwhile, developments in the tourism sector appear to be promising with the influx of tourists in recent months.

Although inflows in the form of workers’ remittances have reduced somewhat in the latter half of 2021, the introduction of special incentive schemes and the actions taken by the authorities to curb illegal fund transfers have generated renewed interest in routing funds through formal channels. The Sri Lanka rupee depreciated by 7.0 per cent against the US dollar in 2021 and has been broadly stable thus far in 2022. At the same time, the Central Bank was able to fulfil the timely settlement of the International Sovereign Bond (ISB) of US dollars 500 million on 18 January 2022. As of end 2021, the gross official reserves were estimated at US dollars 3.1 billion. 2

Credit flows to the private sector continue to expand

Credit extended to the private sector, which slowed down during September and October 2021, has picked up recently, partly reflecting the increased credit flows to finance imports. In the meantime, credit obtained by the public sector from the banking system, particularly net credit to the Government, continued to expand. Despite the recent deceleration observed due to the decline in net foreign assets of the banking system, with the significant expansion in domestic credit, the growth of broad money (M2b) remained elevated by end November 2021. Meanwhile, most market lending rates have adjusted upwards, while deposit rates have also increased albeit at a slower pace.

Further, yields on government securities have increased amidst enhanced market subscriptions at primary auctions for government securities.

Supply side factors remain the key driver of domestic price pressures amidst the possible signs of demand pressures

Inflationary pressures in the domestic front continued to be fuelled by supply side disruptions, upward adjustments to administered domestic prices, and the strengthening of underlying demand conditions in the economy as reflected in the rise in core inflation. Such supply driven price pressures are expected to be transitory, although the possible build-up of demand driven inflationary pressures may compel the adoption of proactive monetary policy measures, which will also help in managing inflation expectations.

Monetary and other policy measures are expected to strengthen the macroeconomic stability

In consideration of the current and expected macroeconomic developments, the Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 19 January 2022, decided to adopt several policy measures with the view to strengthening macroeconomic stability. Accordingly, the Monetary Board decided to:

increase the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank by 50 basis points each, to 5.50 per cent and 6.50 per cent, respectively;

b )

distribute the financing of essential import bills for fuel purchases among the licensed banks in proportion to their foreign exchange inflows;

c )

mandate all registered tourist establishments to accept foreign exchange only in respect of services rendered to persons resident outside Sri Lanka;

d )

extend the payment of an additional Rs. 8.00 per US dollar for workers’ remittances paid in addition to the incentive of Rs. 2.00 per US dollar offered under the “Incentive Scheme on Inward Workers’ Remittances” until 30 April 2022, reimburse the transaction cost borne by Sri Lankan migrant workers through the payment of Rs. 1,000 per transaction, when remitting money to rupee accounts via licensed banks and other formal channels with effect from 01 February 2022 and introduce higher interest rates for both foreign currency and rupee denominated deposits of migrant workers.

The Monetary Board was of the view that the above measures will curtail the possible build-up of underlying demand pressures in the economy, which would also help ease pressures in the external sector, thus promoting greater macroeconomic stability. In keeping with this policy stance, the Central Bank expects a corresponding increase in interest rates, particularly in deposit rates, thereby encouraging savings, while discouraging excessive consumption, which also fuels imports. Therefore, financial institutions are urged to swiftly pass on this increase to deposit rates of the customers. Moreover, the anticipated adjustment in market interest rates will facilitate the reduction in the Treasury bill holdings of the Central Bank through increased market subscriptions, as enunciated in the Six-Month Road Map for Ensuring Macroeconomic and Financial System Stability. Meanwhile, the materialisation of the expected foreign exchange inflows through bilateral arrangements and other import financing arrangements with friendly countries are expected to ensure a healthy level of gross official reserves in the period ahead and further strengthen the external sector in the economy.

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Business

Sri Lanka educates women but keeps many out of work, ADB warns

Published

17 hours ago

2026/06/5

Thilina Walpola

Shannon Cowlin - ADB Country Director for Sri Lanka

Sri Lanka has one of the most educated female populations in South Asia, yet only about one in three women participates in the labour force, making female workforce participation among the lowest in the region and leaving a significant source of economic growth untapped.

That paradox took centre stage at a knowledge forum organised by the Asian Development Bank (ADB) in Colombo on June 3, where government officials, labour authorities, academics and private-sector leaders examined the deep-rooted barriers preventing women from fully participating in the economy and explored reforms needed to unlock their economic potential.

Opening the event, ADB Country Director for Sri Lanka Shannon Cowlin said the issue extends beyond gender equality and has become a critical economic challenge for a country seeking sustained growth and inclusive development.

“Empowering women to participate fully in the labour force is not only a matter of equality; it is essential for inclusive economic growth and poverty reduction in Sri Lanka,” she said.

The forum, held under ADB’s Serendipity Knowledge Programme (SKOP), focused on findings from a recent ADB-supported study exploring the factors behind Sri Lanka’s persistently low female labour force participation.

Cowlin noted that despite notable progress in education and human development, Sri Lanka continues to lag behind on measures of gender equality and women’s economic participation. She said multiple studies have shown that the factors shaping women’s labour force participation are layered, interconnected and multidimensional.

According to the study, many women remain concentrated in informal, low-paid and insecure employment with limited access to social protection and few opportunities for career advancement. Social and cultural expectations continue to place primary caregiving responsibilities on women, often restricting their ability to pursue careers or remain in full-time employment.

The lack of affordable childcare services, unequal access to digital skills and technology, concerns over workplace safety, sexual harassment and inadequate transport options were identified as major obstacles preventing women from entering or remaining in the workforce.

“These are complex challenges that require action from all stakeholders – government, development partners, the private sector, civil society and academia,” Cowlin said.

She stressed that improving women’s labour force participation would require more than isolated policy interventions, calling instead for structural transformation, stronger infrastructure and care services, progressive workplace practices and broader societal changes that improve women’s mobility, safety and economic agency.

The event featured a presentation by Professor Dileni Gunawardena of the University of Peradeniya, who shared findings from ADB’s study on female labour force participation, followed by a panel discussion involving representatives from the International Labour Organisation, the Department of Labour, MAS Holdings and John Keells Holdings.

Panelists discussed measures to improve the enabling environment for women, including greater investment in the care economy, expanded childcare facilities, enhanced skills development, creating safe, supportive workplaces and career pathways for upward mobility.

Participants agreed that increasing women’s participation in the workforce is not merely ‘a nice to have’ but an economic necessity, particularly as Sri Lanka seeks to accelerate recovery, boost productivity and achieve more inclusive growth.

The ADB said Sri Lanka’s economic recovery presents a unique opportunity to address long-standing structural barriers facing women and to build a more inclusive labour market that fully utilises the country’s human capital.

By Sanath Nanayakkare

Business

ComBank offers exclusive financial solutions to the ‘Guardians of the Skies’

Published

17 hours ago

2026/06/5

Thilina Walpola

Hasrath Munasinghe, Chief Operating Officer of Commercial Bank and Air Vice Marshal Rajinth Jayawardena, Director General Welfare of the SLAF exchange the agreement in the presence of representatives of the two organisations.

Reinforcing its commitment to those who serve the nation, the Commercial Bank of Ceylon has entered into a Memorandum of Understanding with the Sri Lanka Air Force (SLAF) to introduce a comprehensive suite of concessionary financial facilities for its officers and other ranks.

The partnership, unveiled in a year that marks the 75th anniversary of the Air Force, which was founded in March 1951 as the Royal Ceylon Air Force, reflects a shared recognition of the critical role played by the SLAF as the steadfast ‘Guardians of the skies,’ entrusted with safeguarding the country’s security and sovereignty.

Under the terms of the agreement, Commercial Bank will extend a range of specially tailored financial products to SLAF personnel, including personal loans, leasing facilities, housing loans and credit cards. These facilities will be offered at concessionary interest rates, alongside concessions on documentation charges, enabling Air Force personnel to access financial support on more favourable terms.

The Bank said the initiative is part of its continuing efforts to deliver best-in-class lending solutions that are both accessible and responsive to the diverse needs of its customers. By offering attractive and affordable repayment structures, the scheme is designed to empower SLAF officers and other ranks to meet their personal financial requirements with greater ease and flexibility.

A key feature of the programme is the ability for beneficiaries to align repayments with their income patterns, ensuring that the facilities remain practical and sustainable over the long term. This flexibility, combined with preferential pricing, is expected to make a meaningful difference to the financial wellbeing of Air Force personnel and their families.

Business

Treasury Bill rate hike compounds stock market volatility

Published

17 hours ago

2026/06/5

Thilina Walpola

The CSE was extremely volatile yesterday mainly due to external and internal negative factors.

‘The escalation of the war situation in West Asia and the proposed tariff hike on Sri Lanka’s exports to the US by the Trump administration are worsening Sri Lanka’s economic woes. Further, the government’s decision to increase the Treasury Bill rate has also created some uncertainty in the market, stock analysts said.

The All Share Price Index was up by 249.83 points, while the S and P SL20 rose by 67.61 points. Turnover stood at Rs 2.79 billion with 11 crossings.

Companies that mainly contributed to the turnover by way of crossings were: Chevron Lubricants 1.5 million shares crossed to the tune of Rs 294 million and its shares traded at Rs 196, TJ Lanka 2.9 million shares crossed for Rs 90.8 million; its shares traded at Rs 31, Citizens Development Business Finance 2.5 million shares crossed to the tune of Rs 80.2 million; its shares traded at Rs 32.50.

ACL Cables 634,248 shares crossed for Rs 60.9 million; its shares traded at Rs 96, CCS 438,000 shares crossed to the tune of Rs 57.4 million; its shares traded at Rs 131, Overseas Realties 991,500 shares crossed for Rs 49.6 million; its shares traded at Rs 50 and Access Engineering 653,000 shares crossed to the tune of Rs 49.3 million; its shares sold at Rs 75.50.

In the retail market companies that mainly contributed to the turnover were; Dialog Rs 133 million (3.2 million shares traded), Seylan Bank (Non-Voting) Rs 110 million (1.7 million shares traded), Colombo Dockyard Rs 96.8 million (751,548 shares traded), Ceylinco Holdings (Non-Voting) Rs 77.5 million (516,000 shares traded), Sampath Bank Rs 74.2 million (530,000 shares traded), JKH Rs 74 million (3.7 million shares traded) and LMF Rs 65 million (781,000 shares traded). During the day 123 million share volumes changed hands in 26272 transactions.

It is said that the manufacturing sector, especially Chevron Lubricants and several other firms performed well, while the banking and financial sector performed too.

Yesterday the rupee was quoted flat at Rs 334.50/335.50 to the US dollar in the spot market on, unchanged from the previous day’s close, dealers said, while bond yields were broadly steady.

The telegraphic transfer rate for Sri Lanka’s rupee against the US dollar was Rs 330.50 buying, Rs 339.50 selling; euro was Rs 381.1884 selling, Rs 395.1054 buying; and the pound Rs 442.6620 buying Rs 456.7076 selling.

A bond maturing on 01.08.2030 was quoted at 12.12/20 percent, down from 12.15.25 percent.

A bond maturing on 15.06.2034 was quoted at 13.12/20 percent, down from 13.15/25 percent.

A bond maturing on 15.03.2035 was quoted flat at 13.15/25 percent.

By Hiran H Senewiratne