Private sector credit surged by LKR 83 billion in Jun 2021 sustaining the positive growth momentum for the 11th consecutive month according to First Capital Monthly Economic Watch.
State credit reflected a net borrowing of LKR 190 billion.
Foreign Reserves slightly improved to USD 4.1 billion in June 2021 relative to USD 4 billion in May 2021. Market liquidity witnessed a significant contraction during July 2021 while recording a modest recovery towards the latter part of the month closing at LKR 8.7 billion.
The overnight liquidity dipped to LKR 0.03 million on July 22, 2021 recording the lowest since September 10, 2019.
Despite the continuation of the import restriction measures, import expenditure increased by 61.7% YoY to USD 1.6 billionn in May 2021 compared to May 2020 driven by the increase in imports of intermediate and investment goods. However, import expenditure in May 2021 was lower (by 6.2%) compared to Apr 2021 (USD 1.7 billion) aided by the lower expenditure values in major import sectors.
With declines recorded in both food & beverages and non-food consumer good categories, expenditure on the importation of consumer goods in May 2021 declined by 0.2% YoY and 4.1% MoM. Import expenditure on intermediate goods increased by 115.0% YoY in May 2021, led by the increase in base metals, chemical products, plastics and articles, textiles & textile articles, etc.,but declined by 2.8% over the previous month.
During the month of July, the secondary bond market yields steered upwards primarily from the mid to long tenor maturities, thereby steepening the yield curve as a result of the increased selling pressure in the market amidst rising uncertainty.
Only one bill auction and one bond auction out of all four bill auctions and two bond auctions held during the month got fully accepted. Yields of short tenors increased by 0-5 bps, mid tenors by 5-35 bps and long tenors by 30-50 bps.
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