Monetary Policy Review: No. 08 – November 2021
The Monetary Board of the Central Bank of Sri Lanka, at its meeting held on 24 November 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 5.00 per cent and 6.00 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 noted the recent acceleration of inflation, driven mainly by supply disruptions and the surge in global commodity prices, and reiterated its commitment to maintaining inflation at the targeted levels over the medium term with appropriate measures, while supporting the economy to reach its potential in the period ahead.
The Sri Lankan economy is gradually recovering The Sri Lankan economy witnessed a strong recovery during the first half of 2021, supported by fiscal and monetary stimulus measures. The re-emergence of the COVID-19 pandemic and the resultant disturbances to production activities appear to have affected the ongoing recovery somewhat during the third quarter of 2021. However, the available high frequency indicators suggest that economic activity is fast returning to normalcy. The removal of COVID-19 related lockdown measures in October 2021 and the successful nationwide COVID-19 vaccine rollout would help activity in the period ahead. While real GDP growth is projected at around 5 per cent in 2021, the ongoing rise in COVID-19 infections both globally and domestically could impact this expectation to some extent.
The external sector remains resilient against strong headwinds Earnings from merchandise exports remained robust, recording over US dollars 1 billion for the fourth consecutive month in September 2021. Preliminary data show that merchandise exports have recorded an all time high in October 2021. Expenditure on imports also increased, widening the trade deficit during the nine months ending September 2021 over the corresponding period of the previous year.
The tourism sector has displayed strong signs of revival with the easing of restrictions. Despite subdued inflows on account of workers’ remittances in recent months, a rebound is expected in the period ahead with the continuous rise in worker migration and efforts taken to facilitate remittance flows through formal channels.
The depreciation of the Sri Lanka rupee against the US dollar is recorded at 7.2 per cent thus far in 2021. The exchange rate has remained stable at around Rs.200-203 levels against the US dollar during the past three months. Meanwhile, gross official reserves were estimated at US dollars 2.3 billion by end October 2021. This, however, 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). Moreover, measures taken by the Government and the Central Bank to attract fresh forex inflows, as well as the anticipated inflows to the private sector, including the financial sector, are expected to augment gross official reserves, thereby strengthening the external sector in the period ahead. Specifically, a greater conversion of export proceeds is observed, while negotiations with the foreign counterparts of the Government and the Central Bank are progressing, broadly in line with the path envisaged in the Six-Month Road Map.
Market interest rates have increased, reflecting the passthrough of tight monetary conditions In response to the tight monetary and liquidity conditions, most market lending rates have adjusted upwards. Yields on government securities, which increased notably, have stabilised with enhanced subscriptions at primary auctions, reflecting improved market sentiments. Meanwhile, credit extended to the private sector, which expanded notably underpinned by eased monetary conditions, has slowed somewhat in September 2021.
However, data for the nine months ending September 2021 indicate that credit flows, particularly to the industry and services sectors of the economy, have improved significantly, thereby supporting the revival of the economy. In the meantime, credit obtained by the public sector from the banking system, particularly net credit to the Government, continued to expand. Overall, the growth of broad money (M2b) decelerated in September 2021, commensurate with the moderation of credit to the private sector and the decline in the net foreign assets of the banking system.
Inflation accelerated recently mainly due to supply side disturbances and the surge in commodity prices internationally Supply side disruptions, removal of domestic price controls and upward adjustments to several administratively determined prices to reflect the rising global energy and other commodity prices along with the gradual firming of aggregate demand conditions, have pushed inflation above the targeted levels recently. A further acceleration of headline inflation is possible in the immediate future, although such movements are expected to be transitory. The monetary policy measures already taken by the Central Bank will help curbing excessive demand pressures and preventing the buildup of adverse inflation expectations.
Policy rates are maintained
at current levels
In consideration of the current and expected macroeconomic developments as highlighted above, the Monetary Board was of the view that the current policy interest rates are appropriate. Nevertheless, the Central Bank will remain vigilant and continue monitoring domestic and global macroeconomic and financial market developments and will take appropriate measures, as and when necessary, with the aim of ensuring stability in the external sector, maintaining inflation in the desired range, and supporting sustained economic recovery.
CSE capital-raising in 2021 reaches record high of Rs. 124 billion
By Hiran H.Senewiratne
A buoyant CSE in 2021 saw capital- raising increasing to a record Rs. 124 billion. The previous highest, in a 10-year time span was in 2018, amounting to Rs. 105 billion, CSE chairman Dumith Fernando said.
“Last year, of the capital raised, a record Rs. 84.4 billion was via debt and Rs. 39.4 billion in equity. The CSE also saw 28 new listings, including 14 debt IPOs and 13 equity IPOs, Fernando told the media while announcing the CSE’s achievements in 2021 and its proposed plans to be implemented in 2022. The event was held at Hotel Taj Samudra last week.
Fernando said that in 2021, the market had its best year, in terms of ASPI gaining 80.5 per cent and the S&P SL20 improving by 60.5 per cent. Market capitalization also reached a 10-year high of 36.7 per cent of GDP or Rs. 5.5 trillion from 19.7 per cent in 2020 or Rs. 2.96 trillion and 34.5 per cent in 2010 or Rs. 2.2 trillion.
“With proactive efforts by both the CSE and the Securities and Exchange Commission (SEC), especially digitization initiatives, the Colombo stock market saw active local investor participation, the CSE chairman said.
The active investor base rose to 63,000 as opposed to the target of 50,000, while the number of new accounts was 37,000, higher from 2020 but fell short of the target of 50,000, he added. Fernando also said the CSE more than doubled turnover to Rs. 4.9 billion per day.
Amid those developments, CSE trading activities were positive throughout the day and at certain times the index reached the 200 level. Most of the blue- chip counters witnessed fresh buying interest and prices in most of them appreciated during the day, stock market analysts said.
Both indices moved upwards. The All- Share Price Index went up by 125 points and S and P SL20 rose by 63.5 points. Turnover stood at Rs 7.1 billion with two crossings. Those crossings were reported in TJ Lanka, which crossed 2.5 million shares to the tune of Rs 139 million and its shares traded at Rs 52 and LOLC Finance 3.9 million shares crossed to the tune of Rs 111 million, its shares traded at Rs 28.
In the retail market top seven companies that mainly contributed to the turnover were, Vallibel One Rs 582 million (six million shares traded), Expolanka Holdings Rs 557 million (1.4 million shares traded), Softlogic Capital Rs 454 million (3.5 million shares traded), Browns Investments Rs 318 million (18.7 million shares traded), Chevron Lubricants Rs 263 million (2.1 million shares traded), Central Finance Rs 254 million (2.3 million shares traded) and Hayleys Rs 240 million (1.6 million shares traded). During the day 256 million share volumes changed hands in 61000 transactions.
Yesterday the US dollar was quoted at Rs 202.45, which was the Central Bank controlled price. However, in the open market the dollar rate exceeded the Rs 250 level, sources said.
CIPM and SLSI collaborate to define National HRM Standards
CIPM Sri Lanka – the Nation’s leader in human resource management together with the Sri Lanka Standards Institution (SLSI) has initiated a collaboration to define much needed National standards in human resource management recently. This initiative will replace the use of varying standards and practices used by people managers in different strata of industry and organizations with credible and accepted international best practices and homogeneous benchmarks. The people management profession has risen to take center stage in organizations around the globe due to the advent of the 4th industrial revolution and now people managers are emerging as employee champions and frontline crusaders in response to the changing world of work brought about by the pandemic. In this backdrop, implementing National HRM standards are becoming increasingly important to successfully respond to the unprecedented challenges brought forth by and in response to the pandemic including changes in lifestyles.
“CIPM Sri Lanka is the only professional body in the country mandated by the supreme legislature as the authority in Human Resource Management, Profession and Practice in Sri Lanka. The time is opportune for us to embark on this long overdue initiative of formulating the National Standards in HRM to standardize the world of work in line with international best practices. Upon completion of this exercise, we will be joining a handful of advanced economies who have defined appropriate national standards in HRM to be on top of the changing world of work” said Jayantha Amarasinghe-President, CIPM Sri Lanka.
CIPM together with SLSI has setup a Committee for Developing National Standards on Human Resource Management comprising of nationally and internationally acclaimed HRM and business professionals and academics, and SLSI experts to take this initiative forward. The Committee, which has been approved by SLSI as a special Sectoral Committee to formulate national standards on HRM, is led by Chairman Dhammika Fernando-Chartered MCIPM and Immediate Past President/President-Asia Pacific Federation of Human Resource Management (APFHRM)/Board Member of the World Federation of People Management Associations (WFPMA).
“We have decided to benchmark the existing, ISO, British and American standards in formulating our country specific National HRM Standards with the collaboration and support of the Sri Lanka Standards Institution. SLSI will actively contribute to this initiative by providing their expertise and assigning key members while assisting to establish modalities and SOPs to drive this nationally important project forward. Once such standards are introduced and promulgated, we can see a great potential in unifying and streamlining practices of HR in line with the globally accepted best practices and standards which will auger well not only for the profession but also for whole of the corporate world in numerous ways” said Dhammika Fernando–Chairman, CIPM Committee for Developing National Standards on HRM.
Emirates adds 5 more flights to Colombo, offering customers 26 weekly flights
Emirates has announced it will add five more flights to Sri Lanka, offering customers 26 weekly flights to Colombo, including a daily service from Male to Colombo. Starting from 10 February 2022, the added services will offer customers more travel choices and flexibility to Sri Lanka’s commercial capital.
The added services will operate every Tuesday, Thursday, Friday, Saturday and Sunday. Emirates flight EK654 will depart Dubai at 10:35hrs and arrive in Colombo at 16:25hrs, local time. The return flight EK655 will depart Colombo at 22:05hrs and arrive in Dubai at 01:55hrs the following day, local time.
“Sri Lanka is a very important market for us and we’re proud to play an important role with supporting the country’s trade and tourism recovery. The idyllic destination attracted nearly 200,000 tourists in 2021, and arrivals in December and January have been encouraging,” said Chandana De Silva, Emirates Area Manager for Sri Lanka and Maldives. “Emirates is happy to be in a position to play a facilitating role by increasing seat capacity to Colombo. The additional flights will also provide more space for export cargo and essential imports like pharmaceuticals.”
Emirates has deployed its modern Boeing 777-300ER aircraft in a three-class configuration on flights to Colombo, offering private suites in First Class, lie flat seats in Business Class and spacious seats in Economy Class. The additional frequencies will add another 1,780 seats into Colombo per week, and Emirates SkyCargo will offer an additional 100 tonnes of cargo capacity each way per week between Dubai and Colombo.
Travellers to and from Sri Lanka benefit from Emirates’ award-winning service and industry-leading products in the air and on the ground across all classes, with regionally inspired dishes and complimentary beverages and the airline’s ice inflight entertainment system which offers more than 4,500 channels of on-demand entertainment in over 40 languages, including movies, TV shows, and an extensive musical library along with games, audio books and podcasts.
Emirates has been gradually rebuilding its global network in a safe and sustainable manner and has resumed passenger services to over 120 passenger destinations, allowing travellers to conveniently connect to the Americas, Europe, Africa, Middle East, and Asia Pacific via Dubai.
Keeping the health and wellbeing of its passengers as top priority, Emirates has introduced a comprehensive set of safety measures at every step of the customer journey. The airline has also been building on its contactless technology offering and has scaled up its digital verification capabilities to provide its customers even more opportunities to utilise the IATA Travel Pass.
Emirates continues to lead the industry with innovative products and services that address traveller needs during a dynamic time. The airline has taken its customer care initiatives further with even more generous and flexible booking policies, and COVID-19 medical travel insurance.
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