Business
CBSL expecting gradual economic recovery following ‘temporary setbacks’ posed by Covid 3rd wave
The Central Bank expects economic activity to record a gradual recovery following a temporary setback due to the third wave of the Covid-19 pandemic, Central Bank Governor Ajith Nivard Cabraal said.
“We have noted that the External Sector remained resilient amidst heightened challenges. With the normalization 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, Cabraal told the Monthly Policy Review Meeting yesterday at the Central Bank in Colombo.
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 fulfill the timely settlement of the International Sovereign Bond (ISB) of US dollars 500 million on January 18, 2022, the Governor said.
Cabraal added: “As of end 2021, the gross official reserves were estimated at US dollars 3.1 billion.
“It has been decided to increase both the deposit rate and the lending rate by 50 basis points each with the view to strengthening macroeconomic stability.
‘’In consideration of the current and expected macroeconomic developments, the Monetary Board at its meeting held on January 19, 2022 has 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) by 50 basis points each, to 5.50 percent and 6.50 per cent respectively.
“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.
“Considering these developments in the External Sector, the Monetary Board, in addition to the policy rates hike, has decided to distribute the financing of essential import bills for fuel purchases among the licensed banks in proportion to their foreign exchange inflows.
“Further, all registered tourist establishments are to accept foreign exchange only in respect of services rendered to persons resident outside Sri Lanka. It has been decided to 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.
“It has been also been decided to 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 February 1, 2022 and to 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.”
The total outstanding market liquidity surplus or excess funds available in Sri Lanka’s banking system for lending and transactions declined by Rs. 36.65 billion in a week, according to the Central Bank’s latest economic indicators report.
An economic researcher analysing the data noted: “Treasury bill and bond auctions likely drained liquidity. If this tightening persists, short-term interest rates could rise, raising borrowing costs and potentially slowing economic growth. The situation warrants close monitoring, especially as the manufacturing sector is already facing a slowdown whether due to seasonal or structural factors.”
The report also highlighted the following developments in Sri Lanka’s economy:
Fiscal improvements: The deficit has narrowed but remains elevated.
Sectoral trends: The stock market rallied, and the services sector showed slower expansion (tourism, retail and IT driving resilience).
Total expenditure and net lending increased to Rs. 1,301.9 bn during the three months ending March 2025 compared to Rs. 1,197.5 bn in the corresponding period of 2024.
During the three months ending March 2025, the overall budget deficit decreased to Rs. 234.5 bn compared to Rs. 281.3 bn recorded in the corresponding period of 2024
The rupee value of T-Bills and T-Bonds held by foreign investors decreased by 2 per cent in comparison to the previous week.
“The April 2025 industrial slowdown points to weaker output, likely due to seasonal factors such as holidays or subdued demand. However, this was partially offset by an expansion in the Services PMI, offering some relief. The broader economic outlook for Sri Lanka remains uncertain, as these mixed signals unfold as Sri Lanka would receive a tariff letter from the US in the coming weeks. With market liquidity already tightening due to government borrowings from the banking system, policymakers face mounting challenges in balancing growth and stability,” the economic researcher noted.
By Sanath Nanayakkare
AIA Sri Lanka’s ‘Pawfect Match’ campaign, in partnership with animal welfare groups, inspired 500+ adoptions of stray pets. The initiative highlighted adoption, responsible ownership, and compassion, tackling Sri Lanka’s stray animal crisis. AIA thanks all supporters for their life-changing impact.
The campaign served as a reminder that even small acts of kindness like adopting a stray can make a big impact. It also provided an opportunity for the public to learn more about responsible pet ownership, animal rights, and the importance of compassion toward all creatures.
Calton Sweet House Pvt. Ltd., a key part of Calton Group, was honored as the Best National Industry Brand in the Medium-Scale Food and Beverage Sector at the National Industry Brand Excellence Awards 2024, organized by the Industrial Development Board. Deshamanya Mahesh De Silva, Director of Finance and IT at Calton Group, accepted the award.
Established in 1991, Calton Sweet House has over 30 years of excellence, specializing in cakes, snacks, and frozen bakery items, with 20+ outlets across Negombo, Katunayake, and Colombo, including at Bandaranaike International Airport. The company holds ISO, HACCP, and GMP certifications, ensuring top-quality standards.
Starting as a small store in 1983, Calton Group now employs 300+ staff and operates multiple businesses, including Calton Hyper Market and Calton Catering, while partnering with global brands like Unilever and Upfield. The group remains committed to serving customers with high-quality, safely packaged food products.
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