Private sector credit growth decelerated gradually to 18 % in August 2017 from 18.6% in June and July 2017 responding to the prevailing high nominal and real interest rates in the domestic market., according to First capital monthly economic watch 2017.
In the external sector, earnings from export maintained its positive growth for the fifth consecutive month in July 2017.However, the cumulative trade deficit widened in July 2017 as a result of the rise in import expenditure, partly attributed to weather related disruptions to power generation and food production.
Gross official reserves improved to above USD 7 bn by mid-june from 5.1bn by end April 2017. Both the government securities market and the Colombo Stock Exchange experienced foreign inflows in recent months. Sri Lanka has met key performance criteria on tax revenues, deficit and foreign reserves, the International Monetary Fund said in its June 2017 review.
A positive conclusion to the 3rd review under the EFF would lead to the release of the next USD 251mn EFF tranche in November.
The passage of the landmark Inland Revenue Act is a major achievement which in turn will support the government’s ambitious social and developmental program. Macroeconomic performance has been mixed with drought and floods taking a toll on growth and inflation. There building of net international reserves should continue to strengthen economic resilience.
Sri Lanka’s private sector credit saw an increase to Rs 53 bn in August 2017 despite slow down in the credit in July. However the credit growth slightly dropped to 18 % YoY. Foreign Reserves decreased to USD 7.3 bn in September from USD 7.7 bn in August.
The market liquidity improved due to net foreign inflows to the debt and equity market and lower debt repayments .
With renewed interest witnessed, a net increase of Rs 22.17 bn was recorded as foreign inflows to government securities for September 2017, resulting in 20-50bps dip in across all maturities.
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