Business

CBSL maintains policy interest rates at their current levels

Published

5 years ago

2021/07/9

The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 07 July 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 Sri Lankan economy is likely to have recorded a higher than expected growth rate in the first quarter of 2021

Although GDP estimates for the first quarter of 2021 have not been released by the Department of Census and Statistics, indicators for several key sectors of the economy point towards a stronger than expected recovery during the quarter. Disturbances to domestic economic activity due to the third wave of the COVID-19 pandemic and related preventive measures weakened the recovery somewhat, in the second quarter of 2021. Nevertheless, the ongoing vaccination drive throughout the country and the likely removal of mobility restrictions are expected to ease the impact of the current wave of COVID-19 on overall economic activity, thereby facilitating a sustained economic recovery towards achieving a GDP growth rate of around 5 per cent in 2021. Along with the expected recovery in the global economy and the improvements on the domestic front, the upward momentum of economic activity is envisaged to sustain over the medium term.

The external sector is expected to gradually recover in the period ahead

In spite of the resilience shown by merchandise exports, the trade deficit widened during the period from January to May 2021, over the same period last year. Challenges emanating from multiple waves of COVID-19 globally and domestically continued to stifle the recovery of the tourism industry. On the other hand, the notable improvement in workers’ remittances continued to provide support for the external current account. While the measures introduced to address challenges in the external sector have helped ease the domestic foreign exchange market conditions to some extent, speculative behaviour and frontloading of imports have caused undue pressures in the market. The exchange rate has recorded a depreciation of 6.7 per cent against the US dollar thus far during the year. As of end June 2021, the gross official reserves were estimated at US dollars 4.0 billion (equivalent to 2.7 months of imports). This does not include the bilateral currency swap facility with the People’s Bank of China (PBoC) of CNY 10 billion (equivalent to approximately US dollars 1.5 billion). Although the level of foreign reserves could experience some variations in the period ahead, such developments are expected to be temporary, with the adequate financing strategies lined up to

Economic Research Department 08.07.2021 2 maintain reserves at sufficient levels and to meet all maturing debt servicing obligations of the Government on time.

Market interest rates remain low, facilitating increased credit flows to the private sector

In response to the monetary policy easing measures adopted by the Central Bank, most market deposit and lending interest rates have declined to their historic low levels. Prevailing low interest rates and the surplus rupee liquidity in the domestic money market enabled the flow of low cost credit to the economy, thus supporting the revival of economic activity. Accordingly, credit extended to the private sector expanded notably during the period from January to May 2021, and this momentum is expected to sustain through 2021. The Central Bank expects domestic investors to make use of the low interest rate environment to expand their productive economic activities and explore new opportunities that are being created in the economy aimed at local and international markets. Meanwhile, credit obtained by the public sector from the banking system, particularly the Government, also increased notably, amidst the impact of the pandemic on government revenue and recurrent expenditure. With the significant expansion in domestic credit, the growth of broad money (M2b) remained elevated by end May 2021.

Any buildup of sustained inflationary pressures will be addressed through appropriate measures over the medium term

Inflation remains moderate, given the subdued aggregate demand conditions, although food inflation has accelerated due to supply-side disruptions. Inflation is expected to remain broadly within the desired 4-6 per cent range during the remainder of 2021. The envisaged improvements in aggregate demand conditions stemming from the effects of the stimulus measures adopted by the Central Bank and the Government and the likely increases in global commodity prices, may generate some inflationary pressures over the medium term. Such pressures will be mitigated through timely policy intervention by the Central Bank, thereby ensuring the maintenance of inflation in mid-single digit levels over the medium term.

Policy rates are maintained at current levels

In consideration of the current and expected macroeconomic developments highlighted above, the Monetary Board decided to maintain the policy interest rates, i.e., 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 Central Bank will continue to monitor domestic and global macroeconomic and financial market developments and stand ready to take appropriate measures, as and when necessary, with the aim of maintaining inflation in the targeted 4-6 per cent range under the flexible inflation targeting framework in the medium term, while supporting sustained economic recovery.

Monetary Policy Decision:

Policy rates

and SRR unchanged

Standing Deposit Facility Rate (SDFR) 4.50%

Standing Lending Facility Rate (SLFR) 5.50%

Bank Rate 8.50%

Statutory Reserve Ratio (SRR) 2.00%

(CBSL)

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Business

Middle East tensions may hit tourism and energy sectors

Published

7 hours ago

2026/03/17

Sahan Weerasooriya

Tourists admiring nature’s abundance in Sri Lanka.

Escalating geopolitical tensions in the Middle East involving Iran are beginning to raise concerns here, with analysts warning that the fallout could affect not only the island’s tourism industry but also its energy sector.

Tourism stakeholders say the first signs of a slowdown in visitor arrivals have begun to emerge as airlines and travel operators adjust to disruptions across key Middle Eastern aviation corridors.

According to Harsha Suriyapperuma, Chairman of the Sri Lanka Tourism Development Authority, the current tensions could temporarily influence travel flows mainly due to disruptions affecting major transit hubs in the Gulf region.

A significant share of travellers heading to Sri Lanka from Europe and other long-haul destinations transit through aviation hubs such as Dubai, Doha and Abu Dhabi.

Industry analysts say that when geopolitical tensions escalate in the Middle East, airlines often revise flight paths, cancel services or adjust schedules due to security concerns and airspace restrictions, which can slow tourism flows to destinations like Sri Lanka.

According to a Tourism industry leader, global travel demand is highly sensitive to geopolitical developments affecting major aviation corridors.

He noted that disruptions to Middle Eastern airspace could result in longer travel routes, higher airline operating costs and increased airfares, which may influence the travel decisions of tourists planning long-haul holidays.

At the same time, economists and energy analysts warn that the conflict could also create ripple effects in global energy markets.

Sri Lanka is heavily dependent on imported fuel, and any instability in the Middle East — particularly involving a major oil producer like Iran — could push global crude oil prices upward.

Energy sector sources said rising oil prices would increase the cost of fuel imports and place additional pressure on the country’s foreign exchange reserves.

Higher global oil prices could also raise operational costs in the power generation sector, particularly for thermal power plants operated by the Ceylon Electricity Board, which relies on fuel and coal imports to meet electricity demand.

Analysts say increased fuel costs could eventually translate into higher electricity generation costs and additional financial pressure on the national power utility.

The tourism sector had entered 2026 on a strong recovery trajectory after attracting more than two million visitors last year, with authorities targeting three million arrivals this year.

However, industry experts caution that prolonged geopolitical instability in the Middle East could slow the momentum of Sri Lanka’s tourism recovery while simultaneously creating new challenges for the country’s energy sector.

Despite these emerging risks, officials remain cautiously optimistic that the impact will be temporary if tensions in the region stabilise in the coming weeks.

They stress that Sri Lanka continues to be viewed internationally as a safe and attractive destination, while authorities are closely monitoring developments in global energy markets and aviation networks.

By Ifham Nizam

Business

NDB raises Sri Lanka’s largest Basel III-Compliant Thematic Bond

Published

7 hours ago

2026/03/17

Sahan Weerasooriya

Kelum Edirisinghe - Director, Chief Executive Officer

National Development Bank PLC (NDB/ the Bank) recently announced that it successfully raised LKR 16.0 billion through the issuance of Basel III-compliant Tier II Rated Unsecured Subordinated Redeemable GSS+ Bonds (the GSS+ Bonds), to be listed on the Colombo Stock Exchange (CSE). This issuance marks a major milestone in thematic fundraising within Sri Lanka’s capital markets landscape, signaling the country’s growing progress in the increasingly important segment of sustainable finance.

The GSS+ Bonds issue opened on 10 March 2026 and was oversubscribed within the same day, demonstrating strong demand from both retail and institutional investors. This response reaffirms the confidence investors place in NDB and its overall financial strength and stability. The issuance of the GSS+ Bonds reflects the Bank’s strong environmental and social considerations embedded in its lending practices. For many years, NDB has maintained a robust Environmental and Social Management System (ESMS) ensuring that funds are directed toward environmentally and socially responsible projects and causes.

NDB’s GSS+ Bonds will be deployed to finance eligible Green (including Blue), Social, Sustainability, and Sustainability-Linked projects, supporting environmentally responsible, socially impactful, and sustainable economic development.

Business

HNB General Insurance fastest in reaching LKR 11 Bn. revenue (GWP) within 10 years of operations

Published

7 hours ago

2026/03/17

Sahan Weerasooriya

Stuart Chapman - Chairman / Sithumina Jayasundara –CEO

HNB General Insurance Limited (HNBGI) announced its financial results for the year ended 31 December 2025, marking a milestone year of accelerated growth, strengthened financial resilience, and sustained business momentum.

The Company recorded a Gross Written Premium (GWP) of LKR 11.0 billion for 2025, reflecting a robust 21% growth compared to LKR 9.1 billion in 2024. This performance significantly outpaced the industry’s growth of 15%, demonstrating the Company’s strong competitive positioning, disciplined execution, and continued customer confidence. With this achievement, HNBGI becomes the first general insurer in Sri Lanka to reach the LKR 11 billion GWP milestone within ten years of operations. The Company also improved its market position, moving up to 6th place from 7th in Sri Lanka’s general insurance sector.

The Fire segment emerged as a standout contributor with a 27% growth, reaching LKR 2.4 billion, while the Motor portfolio grew by 25% to LKR 6.0 billion. Marine recorded a steady 16% increase to LKR 378 million, and the Miscellaneous segment contributed LKR 2.2 billion. The broad-based growth across segments reflects HNB General Insurance’s balanced portfolio, effective distribution reach, and strong customer confidence.

The Company demonstrated its unwavering commitment to customers through timely and efficient claims management, committing LKR 2.5 billion towards Ditwa cyclone-related claims. In addition, a further LKR 4.7 billion was paid in claims across all other segments during the year, underscoring the Company’s financial strength and reliability in times of need.

The Company’s financial strength further consolidated during the year, with Total Assets growing by a significant 31% to LKR 13.38 billion, while Funds Under Management increased by 9% to LKR 6.74 billion. The Capital Adequacy Ratio remained well above regulatory requirements at 190%, reflecting a solid capital base to support future growth.