CENTRAL BANK OF SRI LANKA

ANNUAL ECONOMIC REVIEW

THIS REPORT IS PUBLISHED IN FULFILMENT OF THE STATUTORY

REQUIREMENT STIPULATED UNDER SECTION 80 (3) OF
THE CENTRAL BANK OF SRI LANKA ACT, NO. 16 OF 2023.

2023
Counter sales – Rs. 700 per copy

ISBN 978-624-5917-60-0
ISSN 1391-359X

Printed at Tharanjee Prints (Pvt) Ltd., No. 506, Nawinna, Maharagama, and published by the Central Bank
of Sri Lanka, No. 30, Janadhipathi Mawatha, Colombo 01.
 Dr. P Nandalal Weerasinghe
Governor
Central Bank of Sri Lanka
30, Janadhipathi Mawatha
Colombo 01, Sri Lanka.

10 April 2024

Honourable Ranil Wickremesinghe

President of Sri Lanka and
Minister of Finance, Economic Stabilization and National Policies
Ministry of Finance, Economic Stabilization and National Policies
The Secretariat
Colombo 01.

Dear Sir,

Annual Economic Review of the Central Bank 2023

In terms of Section 80 (3) of the Central Bank of Sri Lanka Act, No. 16 of 2023, within
a period of four months after the close of each financial year, the Central Bank is
required to publish, and lay before Parliament through the Honourable Minister
of Finance, a report approved by the Governing Board of the Central Bank, on the
state of the economy during such financial year emphasising its policy objectives
and the condition of the financial system. The report shall include a review and an
assessment of the policies of the Central Bank followed during such financial year.

The first Annual Economic Review of the Central Bank, as approved by the
Governing Board of the Central Bank, in respect of the year 2023, is submitted
herewith in fulfilment of this obligation.

Yours sincerely,
 CONTENTS

KEY ECONOMIC INDICATORS

KEY SOCIAL INDICATORS

EXECUTIVE SUMMARY
Page
1. MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Summary .... .... .... 1

1.1 Inflation and Price Developments .... .... .... 2
1.1.1 Inflation .... .... .... 2
1.1.2 Prices .... .... .... 11
1.1.3 Consumer Price Indices and Cost of Living .... .... .... 12
1.1.4 Wages .... .... .... 13
1.2 Real Sector Developments .... .... .... 14
1.2.1 Economic Growth .... .... .... 14
1.2.2 Production .... .... .... 15
1.2.3 Expenditure .... .... .... 16
1.2.4 Income .... .... .... 17
1.2.5 Population, Labour Force, and Employment .... .... .... 18
1.2.6 Economic Infrastructure .... .... .... 19
1.2.7 Social Infrastructure .... .... .... 22
1.3 Monetary Sector Developments .... .... .... 24
1.3.1 Domestic Money Market Liquidity and Short Term Interest Rates .... .... 24
1.3.2 Market Interest Rates .... .... .... 25
1.3.3 Credit Aggregates .... .... .... 28
1.3.4 Money Aggregates .... .... .... 30
1.4 External Sector Developments .... .... .... 33
1.4.1 Balance of Payments .... .... .... 34
1.4.2 International Investment Position, Reserve Assets, and Overall Balance. .... 42
1.4.3 External Debt and Debt Service Payments .... .... .... 44
1.4.4 Exchange Rate Movements .... .... .... 47
1.5 Financial Sector Developments .... .... .... 50
1.5.1 Banking Sector .... .... .... 50
1.5.2 Non-Bank Financial Institutions Sector .... .... .... 56
1.5.3 Performance of Financial Markets .... .... .... 62
1.5.4 Financial Inclusion .... .... .... 64

1.5.5 Financial Infrastructure .... .... .... 64

 Page
1.6 Fiscal Sector Developments .... .... .... 69
1.6.1 Key Fiscal Balances .... .... .... 69
1.6.2 Government Revenue, Expenditure, and Net Lending .... .... 70
1.6.3 Financing the Budget Deficit .... .... .... 73
1.6.4 Central Government Debt and Public Debt .... .... .... 74
1.6.5 Central Government Debt Service Payments .... .... .... 76

2. REVIEW OF CENTRAL BANK POLICIES

Summary .... .... .... 77
2.1 Monetary Policy Framework .... .... .... 78
2.2 Monetary Policy Stance and Measures .... .... .... 79
2.3 External Sector Policies .... .... .... 82
2.3.1 Exchange Rate Policy .... .... .... 82
2.3.2 Exchange Restrictions and Capital Flow Management Measures .... .... 83
2.3.3 Relaxation of Import Restrictions .... .... .... 84
2.4 Financial Sector Policy Measures .... .... .... 85
2.4.1 Designation of the Macroprudential Authority .... .... .... 85
2.4.2 Policies Related to Licensed Banks .... .... .... 86
2.4.3 Policies related to Licensed Finance Companies and
Specialised Leasing Companies .... .... .... 87
2.4.4 Public Debt Management Policies .... .... .... 87
2.4.5 Policies for Financial Inclusion .... .... .... 88
2.4.6 Policies on Payments and Settlements .... .... .... 88
2.4.7 Anti-Money Laundering and Countering Financing of Terrorism .... .... 92
2.4.8 Policies for Financial Consumer Protection .... .... .... 95
2.4.9 Policies on Deposit Insurance and Resolution of Financial Institutions .... 96
2.4.10 Financial Sector Policy Reforms .... .... .... 96
2.4.11 Other Policies .... .... .... 97

3. MACROECONOMIC OUTLOOK
Summary .... .... .... 103
3.1 Global Economic Environment and Outlook .... .... .... 104
3.2 Domestic Economic Outlook .... .... .... 105
3.2.1 Inflation Outlook .... .... .... 105
3.2.2 Growth Prospects .... .... .... 108
3.2.3 Monetary Sector Outlook .... .... .... 109
3.2.4 External Sector Outlook .... .... .... 110
3.2.5 Financial Sector Outlook .... .... .... 114
3.2.6 Fiscal Sector Outlook .... .... .... 116
STATISTICAL APPENDIX

SPECIAL STATISTICAL APPENDIX

 TABLES

Page
1. MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM
1.1 Macroeconomic Performances (2018-2023) .... .... 6
1.2 Movements of Inflation (year-on-year) .... .... 10
1.3 Gross National Income by Industrial Origin at Constant (2015) Prices .... .... 15
1.4 Aggregate Demand and Savings at Current Market Prices .... .... 17
1.5 Income Components by Economic Sector at Current Market Prices .... .... 18
1.6 Household Population, Labour Force and Labour Force Participation .... .... 18
1.7 Movements of Interest Rates .... .... 27
1.8 Developments in Money Aggregates .... .... 31
1.9 Current and Capital Account .... .... 33
1.10 Summary of Merchandise Trade Performance .... .... 35
1.11 Summary of Terms of Trade (2010=100) .... .... 37
1.12 Exports under Preferential and Free Trade Agreements of Sri Lanka .... .... 38
1.13 Financial Account .... .... 41
1.14 International Investment Position (Summary) .... .... 43
1.15 Gross Official Reserves, Total Foreign Assets and Overall Balance .... .... 44
1.16 Outstanding External Debt Position .... .... 46
1.17 External Debt Service Payments .... .... 47
1.18 Exchange Rate Movements .... .... 48
1.19 Nominal and Real Effective Exchange Rates .... .... 50
1.20 Total Assets of the Financial System .... .... 53
1.21 Composition of Assets and Liabilities of the Banking Sector .... .... 54
1.22 Composition of Deposits of the Banking Sector .... .... 54
1.23 Profit of the Banking Sector .... .... 55
1.24 Composition of Regulatory Capital of the Banking Sector .... .... 56
1.25 Five-year Performance Summary of EPF .... .... 62
1.26 Summary of Government Fiscal Operation .... .... 70
1.27 Outstanding Government Debt .... .... 75

2. REVIEW OF CENTRAL BANK POLICIES

2.1 Summary of the Domestic Debt Optimisation Operation .... .... 88

3. MACROECONOMIC OUTLOOK
3.1 Global Economic Developments and Outlook .... .... 104
3.2 Near term Macroeconomic Projections .... .... 107
 FIGURES

Page

1.1 Recent Inflation Dynamics in Sri Lanka .... .... .... 3

1.2 Cost of Living, Consumer Price Index and Inflation .... .... .... 12

1.3 Movements of the Informal Private Sector Wage Rate Index during 2023 (Nominal) .... 13

1.4 Annual GDP Growth Rates .... .... .... 14

1.5 Growth in Economic Activities – 2023 .... .... .... 16

1.6 Energy and Power Sector Developments .... .... .... 21

1.7 Key Policy Interest Rates, AWCMR and Overnight Money Market Liquidity .... .... 25

1.8 Movement of Selected Market Interest Rates .... .... .... 26

1.9 Secondary Market Yield Curve for Government Securities. .... .... 28

1.10 Credit Extended to the Private Sector by LCBs .... .... .... 29

1.11 Annual Change in NCG from the Banking System .... .... .... 30

1.12 Contribution to Y-o-Y Growth of Broad Money (M2b) .... .... .... 32

1.13 Highlights of the External Sector .... .... .... 34

1.14 Current Account Balance and its Composition .... .... .... 35

1.15 Composition of Exports .... .... .... 36

1.16 Composition of Imports .... .... .... 36

1.17 Countrywise Trade Balances .... .... .... 38

1.18 Financial Account .... .... .... 41

1.19 International Investment Position .... .... .... 43

1.20 Major Components of Reserve Asset Position .... .... .... 44

1.21 Outstanding External Debt .... .... .... 45

1.22 CBSL Intervention and Annual Average Exchange Rate .... .... .... 48

1.23 Exchange Rate Appreciation / Depreciation .... .... .... 49

1.24 Effective Exchange Rate Indices 24- Currency (2017=100) .... .... 49

1.25 Off-Balance Sheet Exposure of the Banking Sector as at end 2023 .... .... 55

1.26 Profitability Ratios of the Banking Sector .... .... .... 56

1.27 Capital Ratios of the Banking Sector .... .... .... 56

1.28 Total Loans and Advances (Gross) by Productwise for 2022 and 2023 .... .... 59

1.29 Open Market Operations, Standing Rate Corridor, and

Behaviour of Money Market Interest Rates during 2023. .... .... 62

1.30 Movements of Price Indices and Market Capitalisation .... .... .... 63

1.31 Foreign Participation of the CSE .... .... .... 64

 Page

1.32 Retail Transactions .... .... .... 65

1.33 Composition of Government Revenue – 2023 .... .... .... 70

1.34 Government Revenue, Expenditure and Key Fiscal Balances .... .... 71

1.35 Composition of Government Recurrent Expenditure – 2023 .... .... 72

1.36 Outstanding Central Government Debt .... .... .... 74

1.37 Central Government Debt Service Payments (As a percentage of GDP) .... .... 76

3.1 Headline Inflation Projections CCPI (quarterly average, year-on-year, %) .... .... 106

3.2 Projected Quarterly Real GDP Growth (year-on-year, %) .... .... 108

BOX ARTICLES

1 The Effects of Supply Side Inflation on Monetary Policy .... .... .... 7

2 International Monetary Fund’s Extended Fund Facility

(IMF-EFF) Programme – A Progress Update .... .... .... 51

3 The Establishment of Business Revival Units in Licensed Banks to Support

Sustainable Economic Recovery .... .... .... 57

4 Market Conduct Supervision: Upholding Trust in the Financial System .... .... 68

5 Financial Literacy Roadmap of Sri Lanka (2024-2028):

Towards A Financially Literate Sri Lanka .... .... .... 89

6 Mutual Evaluation of Sri Lanka 2025: Its National Significance .... .... 93

7 Making Sri Lanka’s External Current Account Outcomes More Sustainable .... .... 111

Featured Box Article - Major Economic Policy Measures Implemented by or

Related to the Central Bank of Sri Lanka .... .... 98
 STATISTICAL APPENDIX

Table

1. REAL SECTOR

Gross Domestic Product .... .... .... 1

Population, Labour Force and Foreign Employment .... .... .... 2

Colombo Consumer Price Index (CCPI, 2021 = 100) .... .... .... 3

National Consumer Price Index (NCPI, 2021 = 100) .... .... .... 4

Wage Rate Indices .... .... .... 5

2. EXTERNAL SECTOR

Composition of Exports .... .... .... 6

Composition of Imports .... .... .... 7

Direction of Trade - Exports .... .... .... 8

Direction of Trade - Imports .... .... .... 9

Balance of Payments - Current Account .... .... .... 10

Balance of Payments - Financial Account .... .... .... 11

International Investment Position .... .... .... 12

Outstanding External Debt .... .... .... 13

Exchange Rate Movements (Rupees per Unit of Foreign Currency) .... .... 14

3. FISCAL SECTOR

Economic Classification of Government Fiscal Operations .... .... 15

Outstanding Central Government Debt (as at end year).... .... .... 16

4. MONETARY AND FINANCIAL SECTOR

Commercial Banks’ Loans and Advances to the Private Sector .... .... 17

Financial Soundness Indicators - Banking Industry .... .... .... 18

Information on Licensed Finance Companies .... .... .... 19

 SPECIAL STATISTICAL APPENDIX

Table

1. REAL SECTOR

Population and Labour Force .... .... .... 1

National Output .... .... .... 2
Prices .... .... .... 3
2. EXTERNAL SECTOR

Balance of Payments .... .... .... 4

Reserves, Total Foreign Assets, External Debt and Exchange Rates .... .... 5
3. FISCAL SECTOR

Government Fiscal Operations .... .... .... 6

Central Government Debt .... .... .... 7

4. MONETARY SECTOR

Monetary Survey (M2b) .... .... .... 8

Interest Rates .... .... .... 9

DEFINITIONS AND EXPLANATORY NOTES ON STATISTICAL TABLES

The following general notes supplement the footnotes given below the individual tables:
1. In an attempt to bring the material up-to-date, provisional figures are included in some tables.
2. Figures in some tables have been rounded off to the nearest final digit. Hence, there may be
a slight discrepancy between the total as shown and the sum of its components.
3. Differences as compared with previously published figures are due to subsequent revisions.
4. Values indicated within parenthesis are negative values.
5. The following symbols have been used throughout:-

... = negligible n.e.c. = not elsewhere classified

- = nil n.e.s. = not elsewhere specified
n.a. = not available n.i.e. = not included elsewhere
 List of Acronyms
ACU Asian Clearing Union DP Documents against Payment
ADB Asian Development Bank DSTI Debt-Service-to-Income
AIP Agreement in Principle EDB Export Development Board
AML Anti-Money Laundering EDR External Debt Restructuring
APG Asia Pacific Group ELA Emergency Liquidity Assistance
APTA Asia-Pacific Trade Agreement EPF Employees’ Provident Fund
AQR Asset Quality Review EPMS Export Proceeds Monitoring System
ASPI All Share Price Index ETCA Economic and Technology Cooperation Agreement
ATMs Automated Teller Machines ETF Employees’ Trust Fund
AWCMR Average Weighted Call Money Rate EU European Union
AWDR Average Weighted Deposit Rate FATF Financial Actions Task Force
AWFDR Average Weighted Fixed Deposit Rate FEA Foreign Exchange Act
AWLR Average Weighted Lending Rate FDI Foreign Direct Investment
AWNDR Average Weighted New Deposit Rate FIs Financial Institutions
AWNFDR Average Weighted New Fixed Deposit Rate FIT Flexible Inflation Targeting
AWNLR Average Weighted New Lending Rate FIU Financial Intelligence Unit
AWNSR Average Weighted New SME Lending Rate FSOC Financial System Oversight Committee
AWPR Average Weighted Prime Lending Rate FSSNP Financial Sector Safety Net Strengthening Project
AWSR Average Weighted SME Lending Rate FTA Free Trade Agreement
BFCAs Business Foreign Currency Accounts FTRA Financial Transactions Reporting Act
BoD Board of Directors FX Foreign Currency
BOI Board of Investment GDP Gross Domestic Product
BOP Balance of Payments GDPP Government Digital Payment Platform
BSPA Banking (Special Provisions) Act, No. 17 of 2023 GFN Gross Financing Needs
CAR Capital adequacy ratio GNI Gross National Income
CASA Current and Savings Account GOR Gross Official Reserves
CBA Central Bank of Sri Lanka Act, No. 16 of 2023 GSP Generalised System of Preferences
CBSL Central Bank of Sri Lanka GSTP Global System of Trade Preferences
CCPI Colombo Consumer Price Index GVA Gross Value Added
CCyB Counter Cyclical Capital Buffer GWP Gross Written Premium
CEB Ceylon Electricity Board HIES Household Income and Expenditure Survey
CEFTS Common Electronic Fund Transfer Switch IDA International Development Association
CEO Chief Executive Officer IDR Issuer Default Rating
CFMs Capital Flow Management Measures IIP International Investment Position
CFT Countering the Financing of Terrorism IIS Inward Investments Swaps
CI Confidence Interval IMF International Monetary Fund
CIABOC Commission to Investigate Allegations of Bribery IMF-EFF International Monetary Fund’s Extended Fund Facility
or Corruption IORA Indian Ocean Rim Association
COLA Cost of Living Allowance IPOs Initial Public Offerings
COVID-19 Coronavirus disease 2019 IRD Inland Revenue Department
CP Commercial Paper ISB International Sovereign Bond
CPC Ceylon Petroleum Corporation ISFTA Indo-Sri Lanka Free Trade Agreement
CPCs Continuous Performance Criteria IT/BPO Information Technology and Business Process
CPIs Consumer Price Indices Outsourcing
CRIB Credit Information Bureau ITs Indicative Targets
CS-DRMS Commonwealth Secretariat Debt Recording and ITRS International Transactions Reporting System
Management System KMP Key Management Personnel
CSE Colombo Stock Exchange LAF Liquidity Assistance Facility
DA Documents against Acceptance LC Letters of Credit
DCS Department of Census and Statistics LCBs Licensed Commercial Banks
DCTS Developing Countries Trading Scheme LCRs Liquidity Coverage Ratios
DDO Domestic Debt Optimisation LEAs Law Enforcement Agencies
DIEs Direct Investment Enterprises LFCs Licensed Finance Companies
LKR Sri Lanka Rupee RBI Reserve Bank of India
LMFCs The Licensed Microfinance Companies RD Restricted Default
LFPR Labour Force Participation Rate RDs Restricted Dealers
LP Gas Liquefied Petroleum Gas REER Real Effective Exchange Rate
LPOPP LankaPay Online Payment Platform RHS Right Hand Side
LPPL LankaPay (Pvt) Ltd ROA Return on Assets
LSBs Licensed Specialised Banks
ROE Return on Equity
LTV Loan to Value
RTGS Real Time Gross Settlement
MDR Merchant Discount Rate
SBs Structural Benchmarks
MEs Mutual Evaluations
S&P SL20 Standard & Poor’s Sri Lanka 20
ML Money Laundering
SAFTA South Asian Free Trade Area
MLA Monetary Law Act, No. 58 of 1949
ML/TF Money laundering and terrorism financing SAPTA SAARC Preferential Trading Arrangement
MOU Memorandum of Understanding SCL Special Commodity Levy
MPCC Monetary Policy Consultative Clause SD Selective Default
MPR Monetary Policy Report SDF Standing Deposit Facility
MSMEs Micro, Small and Medium Enterprises/Entrepreneurs SDFR Standing Deposit Facility Rate
MTMFF Medium-Term Macro-Fiscal Framework SDR Special Drawing Right
NCC National Coordinating Committee SFCA Special Foreign Currency Accounts
NCG Net Credit to the Government SLA SriLankan Airlines
NCOs Non-Commercial Obligations SLAR Statutory Liquid Assets Ratio
NCPI National Consumer Price Index SLC Sri Lanka Customs
NCRE Non-Conventional Renewable Energy SLC Specialised Leasing Company
NDA Net Domestic Assets
SLDB Sri Lanka Development Bond
NEER Nominal Effective Exchange Rate
SLDIS Sri Lanka Deposit Insurance Scheme
NES National Export Strategy
SLF Standing Lending Facility
NFA Net Foreign Assets
SLFR Standing Lending Facility Rate
NFC Non-Financial Corporations
SLTB Sri Lanka Transport Board
NFIS National Financial Inclusion Strategy
NIR Net International Reserves SLTFTA Sri Lanka-Thailand Free Trade Agreement
NPC National Payments Council SMEs Small and Medium scale Enterprises/Entrepreneurs
NPCI National Payment Corporation of India SOBEs State Owned Business Enterprises
NRA National Risk Assessment SOEs State Owned Enterprises
NSFR Net Stable Funding Ratio SRC Standing Rate Corridor
OCC Official Creditors Committee SRDSF Sovereign Risk and Debt Sustainability Framework
OIAs Outward Investment Accounts SRR Statutory Reserve Ratio
OMO Open Market Operations SSCL Social Security Contribution Levy
OPEC+ Organization of the Petroleum exporting Countries STR Act Secured Transaction Registry Act
Plus STRs Suspicious Transaction Reports
OTP One-Time-Password SVAT Simplified Value Added Tax
PAL Ports and Airports Development Levy TCN Act Trading Clearing and Netting Act
PAT Profit After Tax
TIFA Trade and Investment Framework Agreement
PBOC People’s Bank of China
TEUs Twenty-foot Equivalent Units
PDs Primary Dealers
TF Terrorist Financing
PDCs Primary Dealer Companies
TMU Technical Memorandum of Understanding
PDMO Public Debt Management Office
UAE United Arab Emirates
PFCAs Personal Foreign Currency Accounts
PSFTA Pakistan-Sri Lanka Free Trade Agreement UK United Kingdom
PTA Preferential Trade Agreement UPI Unified Payments Interface
QPC Quantitative Performance Criteria USA/US United States of America
QPM Quarterly Projection Model USD/US$ United States Dollar
QR Quick Response UTs Unit Trusts
RAs Regulatory Authorities VAT Value Added Tax
RAMIS Revenue Administration and Management WBB Welfare Benefit Board
Information System WEO World Economic Outlook
 KEY ECONOMIC INDICATORS

2017 2018 2019 2020 2021 2022 2023 (a)

DEMOGRAPHY
Mid-year population (‘000 persons) (b)(c) 21,453 (d) 21,670 21,803 21,919 22,156 22,181 22,037
Growth of mid- year population (per cent) (b) 1.1 1.1 0.6 0.5 1.1 0.1 -0.6
Population density (persons per sq.km.) (b) 342 346 348 350 353 354 351
Labour force (‘000 persons) (e) 8,567 8,388 8,592 8,467 8,553 8,547 8,408
Labour force participation rate (per cent) (e) 54.1 51.8 52.3 50.6 49.9 49.8 48.6
Unemployment rate (per cent of labour force) (e) 4.2 4.4 4.8 5.5 5.1 4.7 4.7
OUTPUT (f)
GDP at current market price (Rs. billion) 14,387 15,352 15,911 15,646 (d) 17,612 (d) 24,064 (a)(d) 27,630
GNI at current market price (Rs. billion) 14,034 14,962 15,470 15,223 (d) 17,217 (d) 23,433 (a)(d) 26,734
GDP at current market price (US$ billion) (g) 94.4 94.7 89.0 84.4 (d) 88.6 (d) 76.8 (a)(d) 84.4
GNI at current market price (US$ billion) (g) 92.0 92.4 86.5 82.1 (d) 86.6 (d) 74.9 (a)(d) 81.7
Per capita GDP at current market price (Rs.)(h) 670,644 708,442 729,761 713,821 (d) 794,926 (d) 1,084,882 (a)(d) 1,253,785
Per capita GNI at current market price (Rs.)(h) 654,196 690,463 709,516 694,520 (d) 777,073 (d) 1,056,424 (a)(d) 1,213,159
Per capita GDP at current market price (US$) (g)(h) 4,398 4,372 4,082 3,851 (d) 3,999 (d) 3,464 (a)(d) 3,830
Per capita GNI at current market price (US$) (g)(h)(i) 4,290 4,263 3,968 3,747 (d) 3,910 (d) 3,378 (a)(d) 3,706
REAL OUTPUT (percentage change) (f)
GDP 6.5 2.3 -0.2 -4.6 4.2 (d) -7.3 (a)(d) -2.3
Major economic activities of GDP
Agriculture -1.8 6.3 0.5 -0.9 1.0 (d) -4.2 (a)(d) 2.6
Industry 13.0 -1.1 -4.1 -5.3 5.7 (d) -16.0 (a)(d) -9.2
Services 3.6 4.3 2.9 -1.9 3.4 (d) -2.6 (a)(d) -0.2
GNI 6.6 2.2 -0.5 -4.5 4.7 (d) -7.6 (a)(d) -3.0
AGGREGATE DEMAND AND SAVINGS (per cent of GDP) (f)
Consumption 67.0 68.9 71.7 73.3 (d) 70.7 (d) 75.0 (a)(d) 76.2
Private 59.1 60.3 62.7 62.9 (d) 61.2 (d) 67.8 (a)(d) 69.3
Government 7.9 8.6 9.0 10.4 (d) 9.5 (d) 7.2 (a)(d) 6.9
Investment 39.7 38.1 34.1 32.9 (d) 36.7 (d) 28.6 (a)(d) 25.3
Net exports of goods and services -6.7 -6.9 -5.8 -6.2 (d) -7.4 (d) -3.6 (a)(d) -1.5
Exports of goods and services 20.2 21.4 21.8 15.5 (d) 16.9 (d) 21.6 (a)(d) 20.4
Imports of goods and services 26.9 28.4 27.6 21.6 (d) 24.3 (d) 25.1 (a)(d) 21.9
Domestic savings 33.0 31.1 28.3 26.7 (d) 29.3 (d) 25.0 (a)(d) 23.8
Net primary and secondary income from rest of the world 4.2 4.0 3.7 4.7 (d) 3.6 (d) 2.2 (a)(d) 3.4
National savings 37.3 35.1 32.0 31.3 (d) 33.0 (d) 27.2 (a)(d) 27.2
PRICES AND WAGES (percentage change)
Colombo Consumer Price Index (2021 = 100) - annual average - - - - - - 17.4
Colombo Consumer Price Index (2021 = 100) - year-on-year (end period) - - - - - - 4.0
Colombo Consumer Price Index (2013 = 100) - annual average (j) 6.6 4.3 4.3 4.6 6.0 46.4 -
Colombo Consumer Price Index (2013 = 100) - year-on-year (end period) (j) 7.1 2.8 4.8 4.2 12.1 57.2 -
National Consumer Price Index (2021 = 100) - annual average - - - - - - 16.5
National Consumer Price Index (2021 = 100) - year-on-year (end period) - - - - - - 4.2
National Consumer Price Index (2013 = 100) - annual average (k) 7.7 2.1 3.5 6.2 7.0 50.4 -
National Consumer Price Index (2013 = 100) - year-on-year (end period) (k) 7.3 0.4 6.2 4.6 14.0 59.2 -
Producer Price Index (2018 Q4 = 100) - annual average - - - 5.8 10.9 74.0 11.5
GDP deflator (f) 5.5 4.3 3.9 3.1 (d) 8.0 (d) 47.5 (a)(d) 17.5
GNI deflator (f) 5.4 4.4 3.9 3.0 (d) 8.1 (d) 47.3 (a)(d) 17.6
Nominal Wage Rate Indices
Formal Private Sector Employees (1978 Dec = 100) - annual average (l) 0.0 0.6 2.9 0.2 74.4 9.8 0.4
Public Sector Employees (2016 = 100) - annual average - 0.2 4.7 9.2 0.0 16.1 0.0
Informal Private Sector Employees (2018 = 100) - annual average - - - 6.4 9.2 24.5 11.4
EXTERNAL TRADE
Trade balance (US$ million) -9,619 -10,343 -7,997 -6,008 -8,139 -5,185 -4,900
Exports 11,360 11,890 11,940 10,047 12,499 13,106 11,911
Imports 20,980 22,233 19,937 16,055 20,637 18,291 16,811
Terms of trade (percentage change) 1.2 0.02 -1.6 2.5 -8.6 -11.6 -0.6
Export unit value index (2010 = 100) (percentage change) 2.4 4.2 -6.3 -6.8 5.4 0.9 -11.3
Import unit value index (2010 = 100) (percentage change) 1.2 4.1 -4.8 -9.1 15.2 14.1 -10.8
Export volume index (2010 = 100) (percentage change) 7.6 0.5 7.2 -9.7 18.0 3.9 2.4
Import volume index (2010 = 100) (percentage change) 8.1 1.8 -5.8 -11.4 11.5 -22.4 3.0
EXTERNAL FINANCE (US$ million)
Services and primary income account (net) 984 1,381 388 -1,386 -373 240 (d) 841
Current private transfers (net) 6,316 6,155 5,757 6,194 5,221 3,493 5,599
Current official transfers (net) 11 8 9 13 6 3 20
Current account balance -2,309 -2,799 -1,843 -1,187 -3,284 -1,448 (d) 1,559
Overall balance 2,068 -1,103 377 -2,328 -3,967 -2,806 2,826
(a) Provisional (h) Estimates are updated with the latest population figures
(b) As reported by Registrar General’s Department (i) These values may differ from DCS published values due to differences in the use of
(c) Based on the Census of Population and Housing - 2012 quarterly average exchange rates in comparison to annual average exchange rate for
(d) Revised derivation of GNI in US$ terms.
(e) Household population aged 15 and above is considered for the calculation of (j) Compilation of this index was discontinued since February 2023.
labour force. (k) Compilation of this index was discontinued since January 2023.
(f) GDP estimates (base year 2015) released in March 2024 by the Department of (l) Nominal wages of formal private sector employees, whose wages are governed by the
Census and Statistics have been used. wage boards are measured by the minimum wage rate index (1978 December = 100)
(g) Based on quarterly GDP/GNI in US$ terms calculated using quarterly average compiled by the Department of Labour.
exchange rate from 2015 onwards
 KEY ECONOMIC INDICATORS (Contd.)

2017 2018 2019 2020 2021 2022 2023 (a)

Current account balance (per cent of GDP) (f)(m) -2.4 -3.0 -2.1 -1.4 -3.7 -1.9(d) 1.8
Total foreign assets (months of the same year imports) (n) 6.0 5.2 6.3 6.4 3.6 3.9 6.7
Gross official reserves (months of the same year imports) 4.6 3.7 4.6 4.2 1.8 1.2 3.1
Overall debt service ratio (o)
As a percentage of export of goods and services 23.9 28.9 29.7 35.2 30.7 15.4 14.9
As a percentage of current receipts 17.3 21.3 21.8 22.6 22.3 12.3 10.9
Total external debt (per cent of GDP) (f)(m) 54.7 55.3 61.6 58.1(d) 58.4(d) 64.6(d) 65.0
EXCHANGE RATES
Year end
Rs/US$ 152.85 182.75 181.63 186.41 200.43 363.11 323.92
Rs/SDR (p) 217.69 253.51 251.17 268.48 280.53 483.24 434.60
Annual average
Rs/US$ 152.46 162.54 178.78 185.52 198.88 324.55 327.53
Rs/SDR (p) 211.49 229.90 246.97 258.61 283.18 431.91 436.88
NEER (2017 = 100) (24 - currency basket) (q) 100.00 94.05 88.17 85.93 78.64 53.99 53.30
REER (2017 = 100) (24 - currency basket) (q)(r) 100.00 95.45 90.42 91.52 83.58 77.49(d) 71.39
GOVERNMENT FINANCE (per cent of GDP) (f)(s)
Revenue and grants 12.8 12.6 11.9 8.8 8.3 8.4 11.1
Revenue 12.7 12.5 11.9 8.7 8.3 8.2 11.0
o/w Tax revenue 11.6 11.2 10.9 7.8 7.4 7.3 9.8
Grants 0.1 0.1 0.0 0.0 0.0 0.1 0.1
Expenditure and net lending 17.9 17.5 21.0 19.4 20.0 18.6 19.4
Recurrent expenditure 13.4 13.6 15.2 16.3 15.6 14.6 17.0
Capital expenditure and net lending 4.5 3.9 5.7 3.1 4.4 4.0 2.4
Current account balance -0.7 -1.1 -3.4 -7.5 -7.3 -6.4 -6.0
Primary balance 0.0 0.6 -3.4 -4.4 -5.7 -3.7 0.6
Overall fiscal balance -5.1 -5.0 -9.0 -10.7 -11.7 -10.2 -8.3
Deficit financing 5.1 5.0 9.0 10.7 11.7 10.2 8.3
Foreign 3.1 2.1 3.4 -0.5 -0.1 1.8 1.8
Domestic 2.0 2.8 5.6 11.2 11.8 8.5 6.5
Central government debt (t) 72.2 78.4 81.9 96.6 100.0 114.2 (u) 103.9 (u)
Foreign 32.8 38.8 39.0 38.7 37.0 51.8 (u) 42.1 (u)
Domestic (v) (w) 39.4 39.5 42.9 57.9 63.0 62.5 (u) 61.7 (u)
MONETARY AGGREGATES (year-on-year percentage change)
Reserve money 9.8 2.3 -3.0 3.4 35.4 3.3 -1.5
Narrow money (M1) 2.1 4.7 4.2 36.0 24.0 -0.4 14.1
Broad money (M2b) 16.7 13.0 7.0 23.4 13.2 15.4 7.3
Net foreign assets of the banking system 152.6 -155.1 250.3 -308.0 -368.8 -79.9 74.2
Net domestic assets of the banking system 9.8 16.3 4.6 27.8 20.9 20.9 -2.9
Domestic credit from the banking system to
Government (net) 10.0 16.1 11.1 62.7 28.2 28.1 10.9
Public corporations/SOBEs 4.5 40.7 8.3 22.5 18.6 47.3 -56.0
Private sector 14.7 15.9 4.2 6.5 13.1 6.2 -0.6
Money multiplier for M2b (end year) 6.71 7.42 8.18 9.75 8.15 9.11 9.93
Velocity of M2b (average for the year)(f) 2.43 2.27 2.16 1.84 1.73 2.04(d) 2.19
INTEREST RATES (per cent per annum at year end)
Standing Deposit Facility Rate (SDFR) 7.25 8.00 7.00 4.50 5.00 14.50 9.00
Standing Lending Facility Rate (SLFR) 8.75 9.00 8.00 5.50 6.00 15.50 10.00
Bank Rate (x) 15.00 15.00 15.00 8.50 9.00 30.22 14.50
Legal Rate of Interest / Market Rate of Interest (y) 7.06 9.08 11.50 11.64 10.12 7.48 16.97
Money market rates
Average weighted call money rate (AWCMR) 8.15 8.95 7.45 4.55 5.95 15.50 9.24
Treasury bill yields
91-day 7.69 10.01 7.51 4.69 8.16 32.64 14.51
364-day 8.90 11.20 8.45 5.05 8.24 29.27 12.93
Deposit rates
Commercial banks’ average weighted deposit rate (AWDR) 9.07 8.81 8.20 5.80 4.94 14.06 11.64
Commercial banks’ average weighted fixed deposit rate (AWFDR) 11.48 10.85 10.05 7.14 5.94 18.49 14.88
Commercial banks’ average weighted new deposit rate (AWNDR) 10.06 10.94 8.89 4.93 6.45 23.07 11.06
Commercial banks’ average weighted new fixed deposit rate (AWNFDR) 10.65 11.27 9.17 5.08 6.67 23.73 11.33
NSB savings rate 4.00 4.00 4.00 3.50 3.50 3.00 3.00
NSB 12 month fixed deposit rate 11.00 10.50 9.83 5.25 5.50 12.00 8.00
Lending rates
Commercial banks’ average weighted prime lending rate (AWPR)-Weekly 11.55 12.09 9.74 5.81 8.61 27.24 12.13
Commercial banks’ average weighted lending rate (AWLR) 13.88 14.40 13.59 10.29 9.87 18.70 14.21
Commercial banks’ average weighted new lending rate (AWNLR) 14.31 14.54 12.80 8.38 9.48 26.20 14.38
CAPITAL MARKET
All share price index (ASPI) (1985 = 100) 6,369.3 6,052.4 6,129.2 6,774.2 12,226.0 8,489.7 10,654.2
S&P SL20 index (2004 Dec = 1,000) 3,671.7 3,135.2 2,937.0 2,638.1 4,233.3 2,635.6 3,068.4
Value of shares traded (Rs. million) 220,591 200,069 171,408 396,882 1,173,157 686,602 410,629
Net purchases by non nationals (Rs. million) 17,655 -23,239 -11,735 -51,356 -52,648 30,625 4,363
Market capitalisation (Rs. billion) 2,899.3 2,839.5 2,851.3 2,960.7 5,489.2 3,847.2 4,248.9
(m) Based on GDP estimates in US dollars (u) The outstanding central government debt excludes several debt service payments that became
(n) Excludes foreign assets in the form of direct investments abroad and trade credit and overdue after April 12, 2022, the date of which the Interim Policy regarding the servicing of Sri
advances received Lanka’s external public debt was announced by the Ministry of Finance, Economic Stabilization and
(o) Overall debt service ratios were reclassified to capture debt servicing in accordance with National Policies. These debt service payments comprise of overdue interest payments of affected
the External Debt Statistics Manual (2003) of the International Monetary Fund (IMF). debt which deemed to be capitalised as per the Interim Policy and several overdue interest payments
(p) Special Drawing Rights (SDR), the unit of account of the IMF in relation to Sri Lanka Development Bonds.
(q) Exchange rates have been defined in terms of indices so that the appreciation/ (v) Outstanding balance of Treasury bonds issued to State Owned Business Enterprises (SOBEs) has
depreciation of the rupee relative to other currencies is reflected by a rise/fall in the been included.
values of the effective exchange rate indices. (w) Liabilities of the central government to commercial banks reported in the Monetary Survey of the
(r) CCPI is used for the computation of the Real Effective Exchange Rate (REER). The REER Central Bank was used to compile domestic debt until 2022. From 2023 onwards, domestic debt
is computed by adjusting the Nominal Effective Exchange Rate (NEER) for inflation compilation method was changed and is based on the data confirmed by the Ministry of Finance,
differentials with the countries whose currencies are included in the basket. Economic Stabilisation and National Policies.
(s) According to the Ministry of Finance, some fiscal sector statistics of 2019 have been
restated as announced in the Budget Speech for 2020 (x) The rate at which the Central Bank grants advances to banking institutions as the lender of last resort.
(t) As per the guidelines of compiling government debt statistics in the Manual of (y) The Legal Rate is defined under the Civil Procedure Code (Amendment) Act No. 6 of 1990 and is
Government Finance Statistics published by the IMF in 2014, non resident holdings applicable to any legal action for the recovery of a sum of money. The Market Rate is defined under
of outstanding SLDBs have been classified under foreign debt and resident holdings of the Debt Recovery (Special Provisions) Act No. 2 of 1990 and is applicable only in relation to legal
outstanding ISBs of the Sri Lankan Government have been classified under domestic actions instituted by lending institutions for the recovery of debt exceeding Rs. 150,000 arising out
debt from 2019 onwards. Further, debt statistics are presented on net basis (net of of commercial transactions, where there is no agreed rate of interest. The Governing Board of
deposits). the Central Bank determines the Legal Rate and Market Rate for each year and publishes in the
Government Gazette in the month of December to be applicable for the forthcoming year. The Legal
Rate and the Market Rate for the year 2024 is 15.15 per cent per annum.
 KEY SOCIAL INDICATORS

PHYSICAL FEATURES AND CLIMATE

Location Area
Between 5° 55’ & 9° 50’ North Latitude Total area : 65,610 sq.km.
Between 79° 31’ & 81° 53’ East Longitude Land area : 62,705 sq.km.
Inland waters : 2,905 sq.km.
Distance
433 km (269 miles) North to South Climate
226 km (140 miles) West to East Low country : min. 24.8° C - max. 32.1° C
Hill country : min. 18.8° C - max. 27.4° C
Elevation Annual rainfall (average) mm : 2023 : 2,536
2,525 metres (8,284 ft.) Highest 2022 : 1,966
POPULATION AND VITAL STATISTICS

Population Statistics (a) Income Distribution (b)

Mid-year population (‘000) (2023) : 22,037 Gini coefficient of household income (2019) : 0.46
Age distribution (‘000) (2023) Mean household income (2019) : Rs. 76,414 per month
0 - 14 years : 5,568 Median household income (2019) : Rs. 53,333 per month
15 - 64 years : 14,742 Poverty (b)
65 years and over : 1,727 Average daily kilo calorie intake (2019) : 2,120
Population density (2023) : 351 persons per sq.km. Poverty Head Count Index (c) : 14.3 (2019)
Crude birth rate (2023) : 11.2 per 1,000 persons : 16.0 (2016)
Crude death rate (2023) : 8.2 per 1,000 persons : 22.5 (2012/13)
Rate of natural increase (2023) : 3.0 per 1,000 persons Human Development Index (2022) : 0.780
Infant mortality rate (2019) : 7.4 per 1,000 live births (revised) Rank among 193 countries : 78
Dependency ratio (2023) : 49.4%
Sri Lanka Prosperity Index (2021) : 0.796
Average household size (2019) (b) : 3.7 persons
Economy and Business Climate Sub-Index : 0.825
Employment (2023) Well-being of the People Sub-Index : 0.786
Employed persons (’000) (d) : 8,010 Socio Economic Infrastructure Sub-Index : 0.777
Agriculture : 26.1%
Industry : 25.5% Expectation of Life at Birth (2017) : 75.5 years
Services : 48.4% Literacy Rate (2021) (d)
Average : 93.3%
Public sector employees (‘000) (e) : 1,354
Government sector : 84.7% Male : 94.3%

State Owned Enterprises : 15.3% Female : 92.3%

PHYSICAL, SOCIAL AND FINANCIAL INFRASTRUCTURE FACILITIES

Unit 2023 Unit 2023
Transport Water Supply and Sanitation
Length of national roads (A & B) km 12,225 Access to safe drinking water per cent 97.3
Length of expressways km 312.6 Access to pipe borne water per cent 61.6
Length of operating railway track (2021) km 1,607.3
Electricity General Education (2022)
Electrification level (2016) per cent
Area covered by a school (i) 99.3 sq. km. 6.5
Per capita electricity consumption
Student/teacher ratio (i) kWh 642.2 number 16.8
Communication Age specific enrolment ratio (grade 1-9) per cent 90.6
Telephone penetration Primary net enrolment ratio per cent 85.1
Fixed lines per 100 persons 10.5
Including cellular phones per 100 persons 142.0 University Education (j)
Internet penetration (f) per 100 persons 103.8 Student/teacher ratio number 22.5
Average population served Age specific enrolment ratio
by a post office number 5,317 (age 18-22 yrs) (k) per cent 9.9
Financial Infrastructure Progression to university from GCE (A/L)
Banks Eligible for university admission per cent 63.3
Branches of LCBs (g) number 2,929 Admission as a percentage of eligible (2021) per cent 25.2
Branches of LSBs (g) number 706 Government expenditure on education (l) per cent of GDP 1.6
Credit cards in use per 100,000 persons 8,507
Banking density branches per 100,000 16
Public Health (m)
persons
Other financial institutions Hospital beds per 1,000 persons 4.1
Branches of LFCs number 1,828 Persons per doctor number 985
Branches of SLCs (h) number 05 Nurses per 10,000 persons 17.8
Branches of LMFCs number 129 Government expenditure on health per cent of GDP 1.5
ATMs, CRMs and CDMs per 100,000 persons 32

Note : Data for 2023 are provisional Sources: Relevant institutions and United Nations Development Programme Statistics
(a) Registrar General’s Department (f) Including mobile internet services
(b) Based on Household Income and Expenditure Survey (HIES) (2019), Department of Census and (g) All banking outlets excluding student savings units
Statistics (DCS) (h) Including other outlets
(c) In the 2019 survey round of HIES of the DCS, the Official Poverty Line (OPL), which was previously (i) Government schools only
based on the 2002 HIES data, has been revised using the 2012/13 HIES data. With the revision (j) Details of the universities under University Grants Commission's purview
in the OPL, Poverty Head Count Index data has also been revised. (k) Only includes internal enrolment of students
(d) Based on Quarterly Labour Force Survey conducted by DCS (l) Government expenditure on general and higher education
(e) Based on data of Department of Management Services, MoF (m) As of end June 2023
EXECUTIVE SUMMARY

The Sri Lankan economy witnessed a gradual revival in 2023 from the deepest economic
downturn in its post-independence history. Decisive policy adjustments and structural reforms
implemented by the Government and the Central Bank helped restore macroeconomic
stability to a great extent, despite the short run hardships faced by economic stakeholders.
These measures were essential to prevent further deepening of the crisis and to navigate the
economy along a sustainable path of recovery. With risks abound, the unwavering commitment
of policymakers along with wider public acceptance remains imperative to continue with the
economic reform agenda and efforts to regain debt sustainability.

The economic adjustment programme has already yielded promising outcomes in 2023.
Inflation was contained at single-digit levels by end 2023 from its highest level recorded in
2022, enabling the commencement of monetary policy normalisation. The economy recorded
an expansion in the second half of 2023 bringing an end to the longest streak of economic
contraction of six consecutive quarters. The persistent twin deficit of the overall government
budget and the external current account, which was the root cause of the economic downturn,
showed signs of correction in 2023. While a surplus was recorded in the primary balance
of the Government, the external current account also recorded a surplus in 2023. External
buffers, which were almost exhausted during the crisis, were gradually rebuilt during the year.
Improved foreign exchange inflows received from tourism and other services exports as well
as workers’ remittances, amidst subdued import demand, supported the country in alleviating
the severe foreign exchange crunch that prevailed at the time of the crisis. The Central Bank’s
net purchases from foreign exchange inflows along with receipts from the multilateral partners
helped augment the country’s international reserves. In light of these developments, along with
enhanced confidence in the market, the Sri Lanka rupee witnessed a strengthening in 2023 and
early 2024. Concerted efforts to restructure the Government’s external debt portfolio would
provide the required space for the country to make a sustainable recovery, once the process is
completed. Meanwhile, domestic market interest rates declined substantially with the easing
of monetary policy and reduction of risk premia attached to yields on government securities
following the successful finalisation of the Domestic Debt Optimisation (DDO) operation. This
downward adjustment in the market interest rate structure and improved market sentiments
reversed the contractionary spell of credit extended to the private sector since June 2023.
Meanwhile, the financial sector demonstrated its resilience stemming from the proactive
and prudent policies of the Central Bank and the greater crisis preparedness of the financial
institutions.
 Moving towards international best standards and capitalising on lessons learnt, the Central
Bank’s mandate was redefined with the enactment of the Central Bank of Sri Lanka Act, No. 16
of 2023 (CBA) in September 2023, marking a significant milestone in enhancing the Central
Bank’s independence and accountability towards the Parliament and the public. The Central
Bank implemented an array of policies in 2023, initially to bring stability to the economy and
then to buttress the economic recovery. This encompassed the shift from a tight monetary policy
stance to an accommodative stance since June 2023, allowing greater flexibility in exchange
rate determination and progressive removal of administrative restrictions imposed on certain
foreign exchange transactions. The Central Bank guided the financial sector with prudential
regulatory measures, preserving domestic financial system stability. With the enactment of
CBA, in addition to its strengthened role as the supervisory and resolution authority of financial
institutions, the Central Bank’s role in macroprudential policy formulation was solidified, while
its contribution to improving financial inclusion was recognised. Meanwhile, several policy
measures were introduced to strengthen the safety and soundness of the banking and non-
bank financial sector. At the same time, the Central Bank continued its efforts to develop digital
payment systems in the economy, which would help enhance the efficiency and accessibility of
payment methods for the public.

The economic progression witnessed in the latter half of 2023 is expected to continue in
the years ahead, supported by the continuation of the reform agenda under the International
Monetary Fund’s Extended Fund Facility (IMF-EFF) arrangement. While a broadbased
economic expansion is envisaged across all sectors, domestic price stability is expected to
be preserved with greater independence and accountability of the Central Bank in monetary
policymaking and the prohibition of monetary financing of the government budget deficit. The
external sector is anticipated to retain its stability, supported by augmenting external buffers,
normalisation of foreign inflows and completion of the restructuring of the foreign debt portfolio
of the Government. Reinforced by the legislative amendments and greater consolidation, the
financial sector is expected to remain resilient. While continuing the implementation of much
needed institutional and policy reforms aimed at enhancing productivity and efficiency, the
Government is expected to strive with its fiscal consolidation efforts to ensure the transition of
the economy towards a sustainable path. However, the formidable recovery of the Sri Lankan
economy hinges on the continuity of the reforms implemented thus far, and as part of this
process, the successful continuation of the IMF-EFF arrangement and completion of the debt
restructuring process remain paramount. Since the country has not fully exited the crisis, there
is no space available for any slippages from the committed path. Recent experiences proved
the devastating socioeconomic costs of uncharted policy experiments. Moreover, backtracking
from the implemented and planned critical reforms will tip the economy to a state of instability.
Thus, continuing with the broader political and social consensus on economic reforms will
be critical to avoid recurring policy reversals and resultant economic downturns, to ensure
uplifting the welfare of the general public through sustained growth.
Chapter 1
MACROECONOMIC DEVELOPMENTS AND
CONDITIONS OF THE FINANCIAL SYSTEM

Summary
The Sri Lankan economy entered a path towards recovery in 2023 following its deepest
economic catastrophe encountered in the preceding year. The recovery was buttressed by
rapid disinflation, improved external resilience, stronger fiscal balances, and preserved
financial system stability. Prompt and coordinated implementation of a suite of policy measures
by the Government and the Central Bank and the structural reform agenda alongside the
International Monetary Fund’s Extended Fund Facility (IMF-EFF) arrangement reinforced overall
macroeconomic stability. Having benefited from restored stability, the economy commenced
transitioning to a growth trajectory. After six consecutive quarters of contraction, the economy
recorded an expansion in the second half of 2023, limiting the annual economic contraction
during the year. The growth in aggregate demand was driven by both domestic demand and
net external demand. Although unemployment remained unchanged in comparison to the
preceding year, labour force participation declined further in 2023. Inflation that had peaked at
an all-time high in September 2022 reverted to single-digit levels within a year and continued
to remain in the vicinity of the target by end 2023. With the adoption of accommodative
monetary policy stance by the Central Bank since mid-2023 and the decline in risk premia
following the finalisation of the Domestic Debt Optimisation (DDO) operation, market interest
rates including yields on government securities recorded a notable decline in 2023. Credit to
the private sector experienced a positive shift from mid-2023, ending the longest streak of
monthly contractions. The external current account recorded a surplus in 2023 supported by
a significant contraction in the trade deficit amidst increased services exports and improved
workers’ remittances. Gross official reserves improved with the support of net purchases of
foreign exchange by the Central Bank and financing support from multilateral partners. Despite
intermittent volatility, the Sri Lanka rupee recorded an overall appreciation in 2023, which
broadly reflected the market behaviour and sentiments, as the Central Bank adopted a market-
based exchange rate policy. Notwithstanding a series of domestic and external shocks, the
financial sector demonstrated its resilience stemming from the proactive and prudent policies
and greater crisis-preparedness. Amidst challenges, the banking sector, which dominates the
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

financial sector, was able to maintain stability by preserving capital adequacy level, supported

1
by the decline in risk weighted assets, while liquidity was maintained above the regulatory
minimum. Total assets of the banking sector improved along with profitability, while credit
risk as indicated by the Stage 3 loans ratio increased during 2023. The fiscal performance in
2023 was commendable, driven by rigorous consolidation measures for revenue enhancement
and expenditure rationalisation. The primary balance showed a surplus in 2023, while the
overall budget deficit declined compared to previous year. The Government continued to rely
primarily on domestic sources to finance the budget deficit, amidst constraints in accessing
foreign sources. The central government debt as a percentage of GDP declined by end 2023,
primarily due to the growth in nominal GDP and partly due to the impact of rupee appreciation
on foreign debt.

1.1 Inflation and Price during the preceding year, recorded deflation
Developments during several months in 2023. This was primarily
due to the normalisation of supply bottlenecks
1.1.1 Inflation and cost-reflective fuel price adjustments, amidst
the normalisation of global crude oil prices,
Inflation, which reached the historically
together with the impact of the appreciation
highest level in September 2022, recorded
of the exchange rate. The frequent changes in
a rapid disinflation process since then,
electricity tariffs, due to the implementation of
reaching lower single-digit levels towards
cost-reflective pricing, also contributed to the
end 2023. Subdued demand due to the gradual dynamics of inflation during 2023. In particular,
transmission of the effects of the tight monetary the pace of disinflation slowed during the first
conditions to the wider economy was the major quarter of 2023 due to the upward adjustment
contributor to this transition on the demand to the electricity tariffs, while the subsequent
side that prevented the escalation of price reduction of tariffs in July 2023 supported the
pressures. This was further complemented by decline in inflation. However, since September
tight fiscal measures. Further, the normalisation 2023, inflation has been moving upward
of domestic supply conditions, moderation of towards the targeted level, as anticipated, due
global commodity prices, and the strengthening to energy price hikes, particularly the electricity
of the Sri Lanka rupee, alongside the favourable tariff increase, while weather related disruptions
statistical base effect created by the large month- to the agriculture sector also contributed to the
on-month increases in prices seen in 2022 also pickup in inflation, particularly towards the end of
contributed to this rapid disinflation process. the year. Accordingly, CCPI-based year-on-year
Consequently, year-on-year headline inflation, headline inflation was recorded at 4.0 per cent
measured by the Colombo Consumer Price Index (2021=100) by end 2023 compared to 57.2 per
(CCPI, 2021=100), decelerated to 1.3 per cent cent (2013=100)1 by end 2022, while
in September 2023. The prices of food items
1 The Department of Census and Statistics (DCS) commenced publishing NCPI and
and the transport sector, which were two of the CCPI with the new base year, 2021=100, from the data releases of January 2023 and
February 2023, respectively, and discontinued the publication of NCPI and CCPI with
largest contributors to the high inflation episode the old base year, 2013=100.

2
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.1 Recent Inflation Dynamics in Sri Lanka

80

70

60
Contribution to CCPI-based Headline Inflation
(year-on-year) (a) 80

70

60
Contribution to NCPI-based Headline Inflation
(year-on-year) (a)
1
50 50

Per cent
40 40
Per cent

30 30

20 20

10 10

0 0

-10 -10
Jul-21
Mar-21

Nov-21

Jul-22

Jul-23
Jan-21

Mar-22

Nov-22
Jan-22

Mar-23

Nov-23
May-21

Jan-23

Mar-24
Sep-21

May-22

Jan-24
Sep-22

May-23

Sep-23

Mar-21

Nov-21

Mar-22
Jan-21

Nov-22
May-21
Jul-21

Mar-23
Sep-21

Jan-22

Nov-23
May-22
Jul-22
Sep-22

Jan-23

May-23
Jul-23
Sep-23

Jan-24
Food and Non-Alcoholic Beverages Housing, Water, Electricity, Gas and Other Fuels
Transport Restaurants and Hotels
Education Health
Furnishing, Household Equipment and Communication
Routine Household Maintenance Recreation and Culture
Clothing and Footwear Miscellaneous Goods and Services
Alcoholic Beverages, Tobacco and Narcotics Y-o-Y Headline Inflation Sources: Department o f Census and Statistics
Central Bank Staff Calculations

Movements in Headline Inflation (year-on-year) (a) Movements in Core Inflation (year-on-year) (a)

75 73.7 75
64.1

60 CCPI 69.8 60 CCPI

NCPI NCPI
45 45
Per cent

Per cent

50.2

30 30

15 15
5.1 3.1
2.7
0 0.9 0
Jul-21
Mar-21

Nov-21
Jan-21

May-21

Sep-21
Nov-21

Nov-22
Mar-21
May-21

Nov-23
Mar-22
May-22

Mar-23
May-23

Mar-24
Sep-21

Sep-22

Sep-23
Jan-21

Jan-24
Mar-24
Jan-22

Jan-23

Jan-24

Jan-22
Mar-22
May-22
Jul-22
Sep-22
Nov-22
Jan-23
Mar-23
May-23
Jul-23
Sep-23
Nov-23
Jul-21

Jul-22

Jul-23

Source: Department o f Census and Statistics Source: Department o f Census and Statistics
(a) The Department of Census and Statistics (DCS) commenced publishing NCPI and CCPI with the new base year, 2021=100, from the data releases of January 2023 and February 2023, respectively, and
discontinued the publication of NCPI and CCPI with the old base year, 2013=100. Accordingly, data commencing January 2023 in the charts are based on the series with the new base year, 2021=100.

CCPI-based annual average headline inflation in in the Value Added Tax (VAT) rate from 15 per
2023 decelerated to 17.4 per cent (2021=100) cent to 18 per cent alongside the removal of
from 46.4 per cent (2013=100) recorded in certain exemptions at the beginning of 2024, led
2022. The National Consumer Price Index to a brief surge in inflation from January 2024.
(NCPI) based year-on-year headline inflation also However, the reduction of electricity tariffs in early
followed a similar path, dropping to 4.2 per cent March 2024 and several subsequent responsive
(2021=100) by end 2023, compared to 59.2 price reductions are expected to partly negate
per cent (2013=100) recorded at end 2022, the immediate impacts as well as spillovers of the
while NCPI-based annual average headline tax amendments. This was evidenced through the
inflation in 2023 decelerated to 16.5 per cent large reduction of inflation in March 2024, which
(2021=100), compared to 50.4 per cent was partially due to these reasons, along with a
(2013=100) in 2022. Meanwhile, the increase favourable statistical base effect.

3
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

SNAPSHOT OF THE

1 69.8
Inflation registered a rapid disinflation process...
CCPI-based Inflation (Y-o-Y, %)

94.9
Steady rebound in real GDP growth...

2022
Annual
Agriculture -4.2%

Industry -16.0%
4.5
64.4
-7.3%
0.3 57.6 53.4 5.8 Services -2.6% 1.6

End 2022

End 2023

End 2022

End 2023
Sep 2022

Sep 2022
Y-o-Y, %
-0.6
Food Non - Food
-3.0

Inflation returned
-5.3
to single digit levels
Agriculture 2.6%
2023
6.3 Annual
5%
1.3 4.0 (target) Industry -9.2%
-10.7 -2.3%
-11.2
Nov 22

Dec 22

May 23

Nov 23

Dec 23
Mar 23

Aug 23
Sep 22

Sep 23
Feb 23

Apr 23
Oct 22

Oct 23
Jan 23

Jun 23

Jul 23

Services -0.2%
-12.4
2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2 2023 Q3 2023 Q4
Headline

Policy interest rates were reduced... Notable decline in market interest rates...

Policy Interest 32.6

Rates End 2022
by 30
28.2
6.50% pts 26.2
(From Jun - Dec 2023) 23.1

20
18.7
%

SLFR 9.50% 14.2 14.4 14.1 14.5 End 2023

AWCMR 12.4 13.7 13.4 11.6 11.1
SDFR 8.50% 10 11.1
10.3 9.5 10.1
March/Feb
Policy Interest 2024
Rates by
50 bps in March
2024
0

T-bill Yield
Deposit Rate
Lending Rate

Deposit Rate
Prime Rate

Lending Rate
(Monthly

(AWNDR)

91-day
(AWNLR)
AWPR)

(AWDR)
(AWLR)

New
New
Apr 22

Oct 22

Apr 23

Apr 24
Oct 23
Jul 23
Jan 22

Jan 23

Jan 24
Jul 22

Monetary expansion remained subdued... Private sector credit recovered in 2H-2023...

NFA 552
Net Foreign Assets
Money Supply (M2b)
1,311 Growth (Y-o-Y) - 2023 Industry Services
NCG -5.6% 2.1%
Net Credit to the Personal
Government Loans &
Agriculture Sectoral Credit Advances
814 0.9% Growth -0.2%
7.3% (Y-o-Y)
204
Rs. bn

Rs. bn

15.4%
(2022) 181
Quarterly Change in
Private Sector Credit 90

-45
PSC -200 Private Sector Credit
(Private Sector Credit)
Other Growth (Y-o-Y) - 2023
(Other Items Net) -66
-0.6%
-137 6.2%
-165 (2022)
-980
Credit to SOBEs -273
(State Owned Business
Enterprises) 2022 2023

Sep 2022 Mar 2023

Progress of the Staff-level agreement with IMF Executive Board
the IMF on EFF approval and receipt of
IMF-EFF Programme programme the first tranche

4
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

SRI LANKAN ECONOMY 2023

Sri Lanka’s external sector rebounded strongly in 2023...

Current Account
Balance
Gross Official
Reserves
Exchange Rate
1
recorded a surplus in 2023 USD 4.4 bn 363.11 Appreciation
12.1%

2023
end 2022
1977

USD 1.9 bn
323.92

Rs. / USD
end 2023
Lorem ipsum dolor sit amet,
end 2022 end 2023
Exports Imports
consectetuer adipiscing elit, sed
2022 USD 13.1 bn 2022 USD 18.3 bn
diam GOR increased
nonummy with,
nibh euismod
2023 USD 11.9 bn 2023 USD 16.8 bn
tincidunt CBSL Net dolore
ut laoreet Intervention
magna
1.7 bn
2.1 bn Workers’
USD
Remittances 2023
aliquam USD
erat volutpat. appreciation was supported by,
(based on value date)
1.1 bn
USD Higher inflows
2022

USD
3.8 bn and
Lower outflows
Receipts from multilateral institutions
2022

2023

USD and
World
6.0 bn IMF ADB Market sentiments
2023

Earnings from Tourism Bank

Overall financial sector stability was maintained in 2023...

44.9 12.8
Statutory Liquid Stage 3 Loans to 3,857.4
Assets Ratio - DBU (%) Total Loans Ratio (%) Net Worth of the EPF
(Rs. bn)
8.7 Total Assets
Y-o-Y Growth in
Deposits (%) of the Rs

Banking Financial Sector

12%
Sector as at end 2023 EPF
16.9
62% Capital Adequacy
Rs. 33.2 Tn
Ratio (%)
13%
-2.6 Central Bank
Y-o-Y Growth in Loans 1.5
and Advances (%) ROA-before Tax (%)
4.3
ROA-before
LFCs Sector Tax (%)
5% 5%
Other Insurance -3.2
Sector 17.8 Y-o-Y Growth in 22.3
Gross Stage 3 Loans Loans and Capital Adequacy
3% Ratio (%) Advances (%) Ratio (%)

Pronounced fiscal adjustments towards sustainability…

Government Revenue (as a % of GDP) Government Expenditure (as a % of GDP)
8.9 10.5
19.4 (2023)
8.4
11.1
(2022) (2023) 6.5 12.1
18.6 (2022)
Interest Expenditure Non-Interest Expenditure

Primary Balance and Fiscal Balance* (as a % of GDP) Central Government Debt (as a % of GDP)
+0.6 114.2
5 +2.8 2018
100.0
+1.21955
96.6 103.9
+0.04 +0.01 +0.6
1954 1992 2017 2023
-
38.7 37.0 51.8 42.1
-5
-8.3
-10 2023
57.9 63.0 62.5 61.7
-15

-20

2020
-25 2021 2022
Primary Balance Total Interest Expenditure Fiscal Balance (Prov.) 2023
*The fiscal balance equals to primary balance minus interest expenditure
(Prov.)
Foreign Debt Domestic Debt Total Outstanding Central Government Debt

Oct 2023 Dec 2023 Mar 2024

Staff-level agreement IMF Executive Board Staff-level agreement
with the IMF on the approval and receipt with the IMF on the
first review of the second tranche second review

5
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table
1.1 Macroeconomic Performances (2018-2023)

1
Indicator Unit 2018 2019 2020 2021 (a) 2022 (a) 2023 (b)
Real Sector (c)
Real GDP Growth % 2.3 -0.2 -4.6 4.2 -7.3 (b) -2.3
GDP at Current Market Price Rs. bn 15,352 15,911 15,646 (a) 17,612 24,064 (b) 27,630
Per Capita GDP (d)(e) USD 4,372 4,082 3,851 (a) 3,999 3,464 (b) 3,830
External Sector
Trade Balance (c) % of GDP -10.9 -9.0 -7.1 -9.2 -6.7 -5.8
Current Account Balance (c) % of GDP -3.0 -2.1 -1.4 -3.7 -1.9 1.8
Overall Balance USD mn -1,102.9 376.6 -2,327.7 -3,966.6 -2,806.1 2,825.6
External Official Reserves USD mn 6,919.2 7,642.4 5,664.3 3,139.2 1,897.6 4,392.1
Fiscal Sector (c)
Current Account Balance % of GDP -1.1 -3.4 -7.5 -7.3 -6.4 -6.0
Primary Balance % of GDP 0.6 -3.4 -4.4 -5.7 -3.7 0.6
Overall Balance % of GDP -5.0 -9.0 -10.7 -11.7 -10.2 -8.3
Central Government Debt (f) % of GDP 78.4 81.9 96.6 100.0 114.2 103.9
Monetary Sector and Inflation
Broad Money Growth (M2b) (g) % 13.0 7.0 23.4 13.2 15.4 7.3
Private Sector Credit Growth (in M2b) (g) % 15.9 4.2 6.5 13.1 6.2 -0.6
Annual Average Inflation (h) % 4.3 4.3 4.6 6.0 46.4 17.4

(a) Revised Sources: Department of Census and Statistics

(b) Provisional Ministry of Finance, Economic Stabilization and
(c) GDP estimates (base year 2015) released in March 2024 by the Department of Census and Statistics have been used. National Policies
(d) Estimates updated with latest population figures Central Bank of Sri Lanka
(e) Based on quarterly GDP in USD terms calculated using quarterly average exchange rate.
(f) Debt statistics are presented on net basis (net of deposits).
(g) Year-on-year growth based on end year values.
(h) Based on CCPI (2013=100) until 2022, and based on CCPI (2021=100) in 2023

Core inflation also underwent a substantial per cent (2021=100) compared to 34.6 per
disinflation process in 2023. The fall in cent (2013=100) in 2022. Meanwhile, NCPI-
core inflation mirrored the underlying subdued based year-on-year core inflation decelerated
demand conditions in the economy, amidst to 0.9 per cent (2021=100) by end 2023,
the tight monetary conditions until June 2023 compared to 57.5 per cent (2013=100)
and prevailing tight fiscal conditions, and the at end 2022, whereas NCPI-based annual
persistent impact of the erosion of the purchasing average core inflation in 2023 slowed to 15.8
power of the public. Unlike headline inflation, per cent (2021=100) compared to 43.9 per
which picked up during the latter part of 2023, cent (2013=100) recorded in 2022. In the
CCPI-based core inflation continued to decelerate meantime, the impact of increased prices due
throughout 2023 and has accelerated somewhat to VAT adjustments in early 2024 was visible in
since then. This behaviour reflects that the core inflation as well since most items in the core
acceleration in headline inflation in late 2023 consumer basket were subject to VAT.
was mainly due to the price increases in energy As indicated by the inflation expectations
and volatile food items, which are excluded when survey of the Central Bank during the year,
calculating core inflation. Accordingly, inflation expectations of both corporate and
CCPI-based year-on-year core inflation fell household sectors declined from the elevated
to 0.6 per cent (2021=100) by end 2023 levels observed in 2022. Meanwhile, medium
compared to 47.7 per cent (2013=100) by term inflation expectations remained broadly
end 2022, while CCPI-based annual average anchored despite some volatility observed in the
core inflation in 2023 was recorded at 14.5 near term. The downward adjustment in inflation

6
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

BOX 1

1
The Effects of Supply Side Inflation on Monetary Policy

Supply side inflation, often referred to as cost push Lanka, including rice and coconut, are significantly
inflation, is typically driven by changes in production affected2 by variations in temperature and rainfall.
costs, caused by factors such as disruptions to the An increase in nighttime temperatures, particularly
availability of inputs, changes to global commodity due to global warming, significantly decreases rice
prices, revisions to taxes and regulatory measures yields. For example, based on the field experiments
of the Government, unfavourable weather conducted at the International Rice Research
conditions, supply chain disruptions due to global Institution in the Philippines, rice yields are found to
economic conditions and geopolitical tensions, decline by 10 per cent for every 1°C increase in the
and inefficiencies of production processes. In the minimum temperature during the dry season (Peng
Sri Lankan context, irregular weather patterns et al., 2004). Although the trend of vegetable and
are a major factor affecting inflation through the fruit prices can be usually predicted during normal
supply side, causing frequent volatilities in food weather seasons, the impact of climate change or
inflation. Similar to many other countries, Sri the abnormal weather patterns on rice, vegetables,
Lanka is also threatened by the effects of climate and fruits make their pricing unpredictable. In
change on economic activity and social wellbeing. addition to the above, prolonged drought conditions
Additionally, changes in global supply chains, as could impact electricity prices due to a shift from
well as the increase of production costs amidst low cost hydro power to costly fuel based electricity
generation, thus transmitting weather and climate
supply bottlenecks are the main causes for the
related disturbances to the wider economy, creating
recent volatility in inflation through the supply side. If
large supply disruptions.
these supply side pressures are short lived, they may
not pose any major monetary policy implications. Therefore, extreme weather events can have
However, persistent acceleration of inflation due significant macroeconomic effects. These effects
to supply factors could complicate the conduct of were perceived to be largely transitory and less of
monetary policy, mainly due to the possible de- a concern for central banks in the past. However,
anchoring of inflation expectations and it can have the increased frequency and intensity of weather
an adverse impact on a central bank’s credibility. fluctuations, such as heatwaves, prolonged
Literature shows that when the supply shock is droughts, or flooding, can lead to a more persistent
transitory, inflation returns to the equilibrium without impact on inflation and inflation expectations
the need for any monetary policy action, while through the combined impact of direct and second
repeated supply shocks trigger second round effects, round impacts. This remains a major concern
warranting pre-emptive monetary policy action for policymakers and makes forecasting inflation
(John, Kumar and Patra, 2022). increasingly challenging. Meanwhile, given the
enhanced emphasis placed on climate change,
The Impact of Weather Patterns and Climate central banks are gradually incorporating climate
Change on Inflation in Sri Lanka related variables and/or climate specific scenarios
Climate change encompasses enduring alterations into their macroeconomic models to better capture
in temperature and various facets of the earth's the potential impacts of climate change on key
climate system, largely attributed to human activities. economic indicators.
Its impacts are extensive and diverse, spanning
The Impact of Other Supply Side Factors and
environmental, social, economic, and health
Government Policies on Inflation
implications. Irregular weather patterns and climate
change can result in significant fluctuations in food As an oil importing country for both transportation
inflation. In turn, it could lead to higher volatility in and electricity generation, the impact of global oil
headline inflation, particularly in a country like Sri prices on Sri Lanka is substantial and alters inflation
Lanka, where food items account for a large share dynamics through direct and indirect channels.
of the consumption basket.1 The agricultural sector In Sri Lanka, energy, oil, and gas prices are now
revised regularly and are determined broadly
could be affected mainly by changes in rainfall
on a cost recovery basis. As a result, changes in
patterns and rising temperatures. Major crops in Sri
global commodity prices and shipping costs due
1 The Colombo Consumer Price Index (CCPI) and the National Consumer Price Index
(NCPI) are the measures of inflation in Sri Lanka. Out of 12 categories, the food
category has the most significant weight in both indices, accounting for 26.2 per cent 2 The weight for the rice category in the CCPI basket is 2.72 per cent, and for the
in CCPI and 39.2 per cent in NCPI. coconut category, it is 1.38 per cent.

7
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure
B 1.1 Contribution to Headline Inflation: Supply vs. Non-Supply Related Items (CCPI-based, year-on-year) (a)

1 70

60

50
Contribution from Supply Related Items

Contribution from Non-Supply Related Items

Y-o-Y Headline Inflation

40
Per cent

30

20

10

-10
Oct-2015

Oct-2016

Oct-2017

Oct-2018

Oct-2019

Oct-2020

Oct-2021

Oct-2022

Oct-2023
Jan-2015

Jan-2016

Jan-2017

Jan-2018

Jan-2019

Jan-2020

Jan-2021

Jan-2022

Jan-2023

Jan-2024
Jul-2015

Jul-2016

Jul-2017

Jul-2018

Jul-2019
Apr-2015

Apr-2016

Apr-2017

Jul-2020
Apr-2018

Apr-2019

Apr-2020

Jul-2021

Jul-2022

Jul-2023
Apr-2021

Apr-2022

Apr-2023
(a) Supply items contain the set of items in CCPI whose prices are predominantly determined by supply factors, Sources: Department of Census and Statistics
while the remaining items are considered as non-supply items (based on staff judgement). Central Bank Staff Judgement

to geopolitical tensions and global economic The Contribution from Supply Side Factors on
conditions affect domestic prices and may now have Overall Inflation
a greater impact on domestic prices than before.3 Disentangling demand and supply factors behind
Based on recent experiences, the indirect impact of inflation dynamics is a challenging process due
price changes in electricity, fuel, and gas on inflation to the complexity of identification. Food inflation
could be greater than the direct impact amidst is generally considered to be largely driven by
uncertainty. However, such regular adjustments to supply side factors. In addition to the food category
domestic prices of energy will eliminate the risks of the Colombo Consumer Price Index (CCPI)
of one time drastic corrections to domestic prices, basket, prices of certain items in the non-food
similar to the domestic fuel price adjustment and category could also be classified as supply/cost
electricity price adjustments in 2022 and 2023. This driven contributors to inflation, given the increased
would help mitigate large swings in inflation in the frequency and magnitude of price adjustments in
period ahead and would promote forward looking these categories.4
economic decisions by the stakeholders of the
economy, thereby assisting the anchoring of inflation Supply side inflation is often characterised by its
expectations. increased volatility (Table B 1.1) compared to
non-supply inflation. Given the transitory nature of
Further, frequent changes to the tax structure supply side inflation in general, central banks may
can significantly affect inflation volatility, even if adopt a cautious approach in using monetary policy
they are one off events. The recent adjustments actions to address it. Moreover, supply disturbances
in the Value Added Tax (VAT) had a notable move output and prices in opposite directions, and
direct impact on the prices of many items in the the central bank may not be able to maintain both
consumer basket, including fuel prices, thereby output and price stability (Amarasekara, 2009). In
having a greater impact on inflation. Moreover, such circumstances, extreme policies aimed purely
the direct and indirect impacts of these policies at price stability aggravate the effect of the supply
can be unpredictable, as businesses could use disturbance on the real economy. Certain supply
these tax amendments to arbitrarily change prices. side shocks may be better left to correct themselves
Further, the lack of competition for essential items, over time without the need for immediate and
aggressive policy responses. For instance, if the
along with downward price rigidities could lead to
impact stems from transitory weather related factors,
persistent price pressures. An oligopoly in markets
it will gradually diminish. Conversely, if it results
for essentials, such as rice and eggs, could exert
from adjustments to taxes on goods and services or
considerable pressure on the prices of these items
directly and several other prices indirectly.
4 In this estimate, the supply/cost driven category represents food and non-alcoholic
beverages and selected administered price categories such as fuels for personal
3 This impact was earlier absorbed by the relevant State Owned Business Enterprise transport equipment; electricity, gas and other fuels; water bill; and transport services
(SOBE), which in turn had implications on the fiscal sector or the financial sector, categories of the CCPI basket of goods and services, whereas non-supply driven
thereby burdening the public indirectly. category represents all other subcategories of the CCPI basket.

8
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
B 1.2 Supply Side Inflation (CCPI-based, year-on-year) (a)

1
35
140
30
100
25
60 mid-2022:
Substantial
late 2017: Upward energy price
20 revision of LP gas price late 2019/early late 2023:
2020: Prolonged hikes, decline in
and bus fares 2021/22 Extreme
15 mid-2016: Supply rainy conditions
Maha harvest weather
disruptions caused
Per cent

and other conditions

10 by floods
supply
bottlenecks
5
0
early-2017: mid-2018: Upward mid-2019: late 2021: Global 2023:
-5 Drought revisions to prices of Bumper harvest commodity price Normalisation
conditions domestic petroleum in 2018/19 hikes and domestic of supply
-10 2015: Bumper harvest and products and bus fares Maha season
downward revision of prices supply side conditions
of fuel, LP gas and bus fares bottlenecks
-15
Oct-2015

Oct-2016

Oct-2017

Oct-2018

Oct-2019

Oct-2020

Oct-2021

Oct-2022

Oct-2023
Jan-2015

Jan-2016

Jan-2017

Jan-2018

Jan-2019

Jan-2020

Jan-2021
Jul-2015

Jul-2016

Jan-2022
Jul-2017

Jul-2018

Jan-2023

Jan-2024
Apr-2015

Jul-2019
Apr-2016

Apr-2017

Apr-2018

Jul-2020
Apr-2019

Jul-2021
Apr-2020

Jul-2022
Apr-2021

Jul-2023
Apr-2022

Apr-2023
Sources: Department of Census and Statistics
(a) Based on the aggregate price movements of the set of items in CCPI whose prices are predominantly determined by supply factors. Central Bank Staff Judgement

administrative changes, the direct impact of it will issues. Therefore, attempting to address supply side
be mainly a one time occurrence. Even in the case price pressures through monetary policy may result
of transitory or one off supply shocks, central bank in adverse consequences. Raising interest rates to
communications play a key role by providing clarity, ease inflation could slow down economic activity,
assurance, and guidance on the future trajectory of thereby further worsening the supply side pressures.
inflation and anchoring inflation expectations.
However, central banks closely monitor supply
Why are Central Banks Less Aggressive in side inflation, as persistent or severe disruptions
Handling the Supply Side Issues of Inflation? could have broader implications for overall price
Central banks usually do not respond to supply side and economic stability. In some cases, where
shocks as their primary control lies with affecting supply side shocks have secondary effects on
demand side inflationary pressures. Supply side inflation expectations or lead to a more persistent
issues can have an immediate effect on prices and inflationary environment, central banks may consider
inflation. In addition, many supply side factors appropriate actions to mitigate these impacts. In
are essentially structural and weather related, and this regard, the optimal monetary policy response
not simply a consequence of the business cycle. to a single supply shock depends on the nature and
Addressing these may necessitate longer term policy duration of the shock, its second round effects, and
measures or structural reforms, such as supply side the impact on real incomes (Bandera et al., 2023).
policies of the Government aimed at improving the These factors, taken together, determine whether
productive capacity and efficiency of the economy. monetary policy should be ‘looked through’ (no
Central banks, which aim at addressing business policy response) or ‘lean against the shock’ (policy
cycle fluctuations through demand driven policies, adjustment). A sequence of inflationary supply
may not be able to tackle underlying structural shocks would call for a tighter policy response.
In such instances, responding to each shock
Standard Deviation of Supply Side and Non-Supply
Table individually, trading off near term over medium
B 1.1 Side Inflation (CCPI-based, year-on-year, %)
term inflation deviations from target, could result
Year
Headline
Supply Non-Supply
in undesirable outcomes. Therefore, any monetary
Inflation policy response to a series of supply shocks should
2015 1.3 2.8 1.3
2016 1.1 2.5 0.8 be based on the overall macroeconomic impact of
2017 0.9 2.2 1.0 such shocks and should also incorporate a careful
2018 1.0 2.1 0.2
2019 0.6 1.7 0.5
assessment of the dynamics of inflation expectations.
2020 0.8 1.3 0.5 Moreover, amidst larger and persistent supply
2021 2.6 3.9 1.6 shocks, frontloading of monetary policy actions can
2022 20.3 32.0 11.0
2023 20.1 29.9 12.9 keep inflation expectations firmly anchored thus
Source: Department of Census and Statistics maintaining the credibility of the central bank (John
Central Bank Staff Calculations
et al., 2022).

9
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

The Government’s Role in Managing Supply surrounding supply driven inflation present

1
Side Inflation significant challenges for monetary policymaking,
Governments play a crucial role in managing particularly in small open economies like Sri Lanka,
supply side inflation through various policies where a multitude of factors originating from the
and interventions. By prioritising investments in domestic and global environment contribute to
infrastructure like transportation and energy, volatility in prices. While transitory supply shocks
the Government could enhance productivity may not necessitate immediate monetary policy
and efficiency of the economy. In addition, the action, persistent disruptions can complicate the
Government, together with the private sector, could task of maintaining price stability. Moreover, the
focus on increasing investments in agricultural structural nature of some supply side issues demands
infrastructure, such as storage facilities, to boost longer term policy measures and structural reforms,
domestic food production while preventing post often beyond the scope of traditional monetary
harvest losses and stabilising food prices. On policy tools. Despite the limitations in directly
the other hand, regulatory measures can be addressing supply driven inflation, central banks
implemented to bolster market competition, remain vigilant, aiming to mitigate adverse impacts
dismantle barriers for businesses, and streamline on economic stability and inflation expectations.
bureaucratic processes, fostering an environment Ultimately, navigating the intricacies of supply
conducive to investments. In the short run, to driven inflation requires a balanced strategy that
address sudden price pressures emanating from considers both short term stabilisation and long
supply side shocks, the Government could take term economic sustainability. Clear and proactive
proactive measures to facilitate the importation of communication by a central bank on the impact of
food items that are in short supply due to supply supply side disturbances on inflation is expected to
disruptions and shortages, as and when required, manage expectations and ensure domestic price
and take preventive measures to minimise the stability, along with appropriate monetary policy
upward price movements. The Inflation Reduction actions to manage demand pressures on inflation.5
Act of 2022 in the USA is an example of a recent
Government initiative to address supply side issues. References
The Act aims to curtail inflation by lowering drug
1. Amarasekara, C. (2009) Central bank objectives and aggregate disturbances.
prices, and investing in domestic energy production Proceedings of the Central Bank of Sri Lanka International Research
while promoting clean energy. Conference – 2009, pp. 41-55.
2. Bandera, N., Barnes, L., Chavaz, M., Tenreyro, S., and von dem Berge, L.
(2023) Monetary policy in the face of supply shocks: The role of inflation
Conclusion expectations. In ECB Forum on Central Banking, pp. 26-28.
3. John, J., Kumar, D., and Patra, M.D., (2022) Monetary policy: Confronting
There is an intricate interplay between supply supply-driven inflation, RBI Bulletin, 76(7), July 2022, pp. 97-109.
side dynamics, such as weather patterns, global 4. Peng, S., Huang. J., Sheehy. J., Laza. R., Visperas. R., Zhong. X., Centeno. G.,
Khush.G. and Cassman. K. (2004) Rice yields decline with higher night
commodity prices, and Government policies, and temperature from global warming, Proceedings of the National Academy of
their profound impacts on inflation. The complexities Sciences, 101(27), pp. 9971-9975.

Table
1.2
Movements of Inflation (year-on-year)
Per cent
2013=100 2021=100
Dec-2019 Dec-2020 Dec-2021 Sep-2022 Dec-2022 Sep-2023 Dec-2023 Jan-2024 Feb-2024 Mar-2024
Headline CCPI 4.8 4.2 12.1 69.8 57.2 1.3 4.0 6.4 5.9 0.9
Inflation NCPI 6.2 4.6 14.0 73.7 59.2 0.8 4.2 6.5 5.1
Core CCPI 4.8 3.5 8.3 50.2 47.7 1.9 0.6 2.2 2.8 3.1
Inflation NCPI 5.2 4.7 10.8 64.1 57.5 1.7 0.9 2.2 2.7
Food CCPI 6.3 9.2 22.1 94.9 64.4 -5.2 0.3 3.3 3.5 3.8
Inflation NCPI 8.6 7.5 21.5 85.8 59.3 -5.2 1.6 4.1 5.0
Non-Food CCPI 4.3 2.0 7.5 57.6 53.4 4.7 5.8 7.9 7.0 -0.5
Inflation NCPI 4.2 2.2 7.6 62.8 59.0 5.9 6.3 8.5 5.1
Note: The Department of Census and Statistics (DCS) commenced publishing NCPI and CCPI with the new base year, 2021=100, from the data releases of January 2023
and February 2023, respectively, and discontinued the publication of NCPI and CCPI with the old base year, 2013=100.
Source: Department of Census and Statistics

10
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

expectations was driven by a variety of factors, prices, a favourable harvest was realised. This

1
including the deceleration in realised inflation translated into a decline in the prices of certain
supported by stringent fiscal and monetary domestically produced food items during the
policies. In addition, the appreciation of the Sri year. Nevertheless, in the latter part of the
Lanka rupee against the US dollar, eased supply year, extreme weather conditions across the
side disruptions, moderation of global commodity entire island coupled with festive demand, led
prices, and relaxation of import restrictions to substantial increases in volatile food prices.
contributed to driving inflation expectations Meanwhile, prices of imported food items,
downward. Accordingly, the inflation expectations which recorded significant increases in 2022,
of the corporate sector reached single digit moderated to some extent during 2023, which is
levels by August 2023. Subsequently, inflation attributable to the strengthening of the Sri Lanka
expectations declined further with the exception of rupee and the softening of global commodity
marginal increases in October 2023 attributed to prices despite export restrictions imposed by some
the electricity tariff adjustments and in December countries.
2023 following the announcement of VAT
The cost-reflective pricing formula played a
amendments. Meanwhile, inflation expectations
pivotal role in shaping the price movements
of the household sector reached single digit levels
by November 2023 followed by a slight uptick in of non-food items. The prices of items in
December 2023. the non-food category exhibited an overall
increasing trend in 2023, yet at a moderate pace
1.1.2 Prices compared to the substantial increases observed
The general price level, measured by in 2022. Accordingly, non-food prices increased
both CCPI and NCPI, exhibited a modest until March 2023 primarily due to the upward
increase in 2023 from substantially high revision to electricity tariff by 146 per cent for bills
levels in the preceding year. Prices of both consuming 90 units2 effective from 16 February
domestically produced and imported food items 2023, while domestic consumers experienced a
increased, though at a slower rate compared to tariff hike of 66 per cent on average. However,
the substantial price hikes witnessed in 2022. starting from March 2023, non-food prices
Moreover, price movements of non-food items experienced a decrease until July, followed by an
were primarily impacted by the cost-reflective increase until November 2023, primarily driven
pricing adjustments made throughout the year. In
by price adjustments in several administrative
line with these developments, the cost of living of
items. There was a downward adjustment to the
the economy, as indicated by the consumer price
electricity tariff by 24 per cent for bills consuming
indices, continued to increase in 2023, but at a
90 units effective from 01 July 2023 followed
slower rate compared to 2022.
by an upward revision of 18 per cent effective
Prices of food items, which were primarily from 20 October 2023. Further, water tariffs
driven by supply side factors, albeit with underwent an upward price revision of 102 per
periodic influence from demand side factors cent for bills consuming 22 units effective from 01
during festive seasons, exhibited a modest
August 2023, partially reflecting the changes in
increase compared to the substantial price
electricity tariff revisions. During 2023, the prices
hikes witnessed in 2022. With the adequate
of Petrol (92 Octane), Auto Diesel, and Kerosene
supply of chemical fertiliser and decreased
input costs, in line with reductions in fuel 2 The expenditure related to using 90 units is considered in the CCPI basket.

11
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

exhibited overall downward trends, although In addition, prices of alcoholic beverages and

1
there were intermittent increases observed in tobacco increased following the upward revision
February and during the period from July to to Excise Duty effective from 01 July 2023.
October 2023. These adjustments were made
1.1.3 Consumer Price Indices and
adhering to the cost-reflective pricing formulas
Cost of Living
amid fluctuating global crude oil prices. Further,
LP Gas prices demonstrated an overall decline Against this backdrop, it was observed that
in 2023, despite increases in the months of both official Consumer Price Indices (CPIs),
February, September, October, and November. which measure changes in the general price
level, exhibited a modest rise throughout
Aligning with changes in fuel prices, bus fares
2023. Accordingly, CCPI (2021=100) increased
were reduced by 7 per cent effective from 31
at a slower pace during 2023 compared to the
March 2023 and subsequently increased by 4 per
previous year, recording 195.1 index points in
cent effective from 03 September 2023. However, December 2023. The movement in CCPI was
no revision was made to train fares in 2023. largely in line with the movement of prices of

Figure
1.2 Cost of Living, Consumer Price Index and Inflation

Cost of Living as reflected by Cost of Living as reflected by

CCPI (2021=100) (Rs.) NCPI (2021=100) (Rs.)

176,253
103,383
150,184
88,704
68.1%
66.6% 56.2%
91,880 53.9%
50,729

73.8% 60.8%
33.4% 31.9% 43.8%
46.1%
26.2% 39.2%

2021 2022 2023 2021 2022 2023

Non-Food Food Non-Food Food
Sources: Department of Census and Statistics
Central Bank of Sri Lanka

CCPI vs. Headline Inflation

225 100 Following the high inflation episode in 2022, the
role of monetary policy has been to minimise
200 80
further increases in the general price level,
thereby bringing headline inflation
Per cent

175 60
Index

(year-on-year) to the targeted level, in line

150 40 with the Central Bank’s primary objective of
achieving domestic price stability. Without
125 20 such appropriate policy measures, the sharp
escalation in price levels observed in late 2021
100 0
and 2022 could have continued further, leading
Jan-22

Mar-22

Jan-24

Mar-24
May-22

Jul-22

Sep-22

Nov-22

Jan-23

Mar-23

May-23

Jul-23

Sep-23

Nov-23

to hyperinflation. By ensuring price stability, the

Central Bank supports the overall health and
CCPI (2021=100) - Index Value stability of the economy, which is necessary for
Headline Inflation (CCPI, year-on-year) (RHS)*
sustainable economic growth over the long run.
Source: Department of Census and Statistics
*Note: Year-on-year Inflation for 2022 is based on CCPI (2013=100)

12
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

items in the non-food category except for June, Figure Movements of the Informal Private Sector
1.3 Wage Rate Index during 2023 (Nominal)

1
August, October and December 2023. The NCPI
(2021=100) also increased at a slower pace 180 25
21.5 22.2
during 2023 compared to 2022 recording 208.8 170
20
index points in December 2023. The movement 17.1
160
of NCPI was mainly attributed to fluctuations in 14.6 15

Per cent
13.3

Index
12.1
prices of items in the non-food category except 150
9.6 10
for May, June, September, November and 140 7.1 6.8
6.2 5.9
December 2023. 130
4.7
5

The cost of living, as reflected by the 120 0

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
consumer price indices,3 continued to 2022 2023 Year-on-Year (RHS)

increase in 2023, although at a slower pace Source: Central Bank of Sri Lanka

compared to the surge witnessed in 2022.

2023 except in the informal private sector,
The estimated average monthly consumption
expenditure for a household,4 based on CCPI which recorded an increase during the year
(2021=100), increased from Rs. 150,184 in compared to 2022. This increase in nominal
2022 to Rs. 176,253 in 2023 by 17.4 per wages of employees in the informal private sector
cent. This indicates a considerable slowdown was mainly attributable to the demand for higher
compared to the 63.5 per cent increase recorded wages by daily wage earners, due to the rising
in 2022 compared to 2021. Similarly, based cost of living and shortage of labour supply.
on NCPI (2021=100), the estimated average
Meanwhile, on an annual average basis, real
monthly household5 consumption expenditure
wages recorded an erosion during the year across
increased from Rs. 88,704 in 2022 to
Rs. 103,283 in 2023 by 16.5 per cent both the private and public sectors. Nevertheless,
highlighting a notable easing from the 74.9 per available wage indices i.e., informal private
cent increase recorded in 2022. Considering sector wage rate index (2018=100), formal
the distribution of consumption expenditure private sector minimum wage rate index (1978
between food and non-food items, it is evident December=100), and public sector wage rate
that a major share is allocated to non-food index (2016=100) exhibit certain limitations in
items. Further, the notable increase observed in
capturing the overall wage developments of the
the share of monthly household consumption
economy.
expenditure allocated to the food category in 2022
moderated in 2023 due to the improved supply Private Sector Wages
conditions in the country.
Nominal wages of informal private sector
1.1.4 Wages
employees, as indicated by the informal
Available information6 shows that wages private sector wage rate index (2018=100),
remained largely stagnant throughout exhibited an increasing trend throughout
2023. Notably, the index increased in nominal
3 Consumer price indices are based on fixed consumption baskets derived from House-
hold Income and Expenditure Survey (HIES) (2019) conducted by DCS. Hence do not
terms by 11.4 per cent in 2023 compared to
reflect the changes in the household consumption patterns over the period.
the previous year. In terms of the sub-activities,
4 An average household in Colombo District consists of 3.8 persons based on the HIES
(2019) conducted by DCS. namely, agriculture, industry, and services, the
5 An average household in Sri Lanka consists of 3.7 persons based on HIES (2019)
conducted by DCS. informal private sector wage rate index increased
6 Information in this section is primarily based on the public sector wage rate index
(2016=100) and informal private sector wage rate index (2018=100) compiled by in nominal terms by 13.0 per cent, 9.9 per
CBSL, and the formal private sector minimum wage rate index (1978 December=100)
compiled by the Department of Labour. cent and 13.1 per cent, respectively, in 2023,

13
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

compared to 2022. This was driven by the 1.2 Real Sector Developments

1
continuous demand from daily wage earners for
higher compensation in response to the rising cost 1.2.1 Economic Growth
of living. As a result, employers were compelled In 2023, the Sri Lankan economy showed
to increase daily wages to retain particularly
signs of rebound with a moderate contraction
experienced workers ensuring continuity of their
of 2.3 per cent, in comparison to a significant
business operations. Further, a significant labour
contraction of 7.3 per cent observed in 2022.
shortage across all sectors, attributed to the
The gradual yet steady rebound in 2023 was
migration of workers to other countries, created a
evident, particularly in the second half of the
competitive environment for experienced workers,
year, during which the Gross Domestic Product
resulting in wage increases. However, owing to
(GDP)7 recorded positive growth rates. This was
the high inflation environment that prevailed until
underpinned by renewed macroeconomic stability
early 2023, employees in the informal private
amidst softening inflation and easing of external
sector experienced a real wage erosion of 7.1 per
sector pressures.
cent in 2023, compared to the previous year.
GDP at current market prices grew by 14.8
Nominal wages of employees in the formal
per cent to Rs. 27,629.7 billion in 2023,
private sector, as measured by the minimum
owing to the price impact, as reflected by the
wage rate index (1978 December=100)
compiled by the Department of Labour, of GDP deflator of 17.5 per cent. Further, Gross
employees whose wages are governed by National Income (GNI), estimated by adjusting
wage boards, recorded a slight increase in GDP for the net primary income from the rest of
2023. Accordingly, the nominal minimum wage the world, grew by 14.1 per cent at current prices
rate index increased by 0.4 per cent in 2023 in 2023. In US dollar terms, GDP increased to
compared to the previous year. Nevertheless, the 84.4 billion in 2023 from 76.8 billion in 2022,
minimum real wage rate index decreased by 17.6 supported by the appreciation of the Sri Lanka
per cent in 2023 compared to 2022. rupee during the year.

Public Sector Wages Driven by the growth in nominal GDP and

the decline in mid-year population, GDP
Nominal wages of public sector employees, per capita increased to Rs. 1,253,785 in
as measured by the public sector wage rate 2023, compared to Rs. 1,084,882 in 2022.
index (2016=100), remained unchanged Meanwhile, GNI per capita also increased to
in 2023, recording a real wage erosion of Rs. 1,213,159 in 2023, compared to
17.5 per cent compared to the previous year.
Nevertheless, as proposed by the Budget 2024, 7 DCS estimates GDP in production, expenditure and income approaches.
the Cost of Living Allowance (COLA) for public
Figure
sector employees was increased by 1.4 Annual GDP Growth Rates (a)
Rs. 10,000.00 from January 2024. Due to fiscal 10

constraints, public sector employees were given a 5

4.2

partial payment of Rs. 5,000.00 from January to 0

Per cent

-0.2
-5 -2.3
March 2024. The full payment of Rs. 10,000.00 -4.6
-7.3
-10
will be made from April 2024 onwards. -15
Meanwhile, arrears for the initial three months will -20
2019 2020 2021 2022 2023
be paid in three equal instalments, starting from Agriculture Industry Services GDP
January 2025. (a) Based on the GDP estimates (base year 2015) Source: Department of Census and Statistics

14
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Rs. 1,056,424 in 2022. In US dollar terms, GDP continued to impact all industry activities,

1
per capita in 2023 was 3,830, compared to resulting in a 9.2 per cent contraction in
3,464 in 2022, while GNI per capita was 3,706, Industry activities during 2023. This was
compared to 3,378 in 2022. driven by the notable decline in the construction
industry, which is highly vulnerable to economic
1.2.2 Production downturns, mainly due to the holdback of
Agriculture construction projects. Further, manufacturing
activities, the largest segment of the Industry
Agricultural activities exhibited a notable sector, contracted during the year mainly due
resurgence, with a 2.6 per cent increase in to the significant decline in global demand for
value added in 2023, marking a significant the manufacture of textiles, wearing apparel and
turnaround from the 4.2 per cent contraction leather-related products. However, most of the
witnessed in 2022, mainly driven by the other manufacturing activities recorded a strong
improved supply conditions, especially recovery in the latter part of the year, mainly
fertiliser, other agrochemical inputs and supported by the manufacture of food, beverages
fuel. The growing of rice, fruits, vegetables, and and tobacco products, and the manufacture of
fishing activities were the main contributors to this coke and refined petroleum products.
growth. However, the growing of tea, rubber and
coconut contracted during the year, largely due to
Services
the adverse impact of weather anomalies. A notable growth in accommodation,
food and beverage services, and transport
Industry
activities, mainly attributable to the gradual
Although a gradual recovery in supply revival of the tourism sector and the
conditions was observed throughout the uninterrupted provisioning of power and
year, the subdued demand conditions energy, played a pivotal role in limiting the

Table Gross National Income by Industrial Origin at Constant (2015) Prices (a)(b)
1.3

Rate of Change Contribution to Growth As a Percentage of GDP

(%) (%) (%)
Economic Activity
2022 (c) 2023 2022 (c) 2023 2022 (c) 2023
Agriculture, Forestry and Fishing - 4.2 2.6 - 0.3 0.2 7.5 7.9
Manufacturing, mining and quarrying and other industry - 13.9 - 4.7 - 2.9 - 0.9 19.6 19.1
Of which: Manufacturing activities - 12.7 - 3.2 - 2.2 - 0.5 16.1 16.0
Construction - 20.9 - 20.8 - 1.9 - 1.6 7.6 6.2
Wholesale and retail trade, transportation and storage, 2.4 3.1 0.6 0.8 26.5 28.0
accommodation and food service activities
Information and communication - 0.4 - 13.2 - 0.0 - 0.5 3.4 3.0
Financial and insurance activities - 18.3 - 5.3 - 1.0 - 0.3 5.0 4.8
Real estate activities (including ownership of dwelling) - 12.1 - 6.0 - 0.6 - 0.3 4.6 4.4
Professional, scientific, technical, administration and supporting - 17.7 2.4 - 0.4 0.0 2.0 2.1
service activities
Public administration, defense, education, human health and social - 0.3 - 0.6 - 0.0 - 0.1 9.6 9.8
work activities
Other services (excluding own-services) 0.3 0.4 0.0 0.0 8.2 8.4
Equals Gross Value Added (GVA) at Basic Price - 7.0 - 2.6 - 6.6 - 2.5 94.1 93.7
Taxes less subsidies on products - 12.4 2.8 - 0.8 0.2 5.9 6.3
Equals Gross Domestic Product (GDP) at Market Price - 7.3 - 2.3 - 7.3 - 2.3 100.0 100.0
Net primary income from rest of the world - 4.5 - 23.7
Gross National Income at Market Price - 7.6 - 3.0
(a) Based on the GDP estimates (base year 2015) Source: Department of Census and Statistics
(b) Provisional
(c) Revised

15
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure
1.5 Growth in Economic Activities - 2023 (a)

1 Agriculture

Rice 20.0
Industry

Construction -20.8
Financial service
activities
Services

-10.0

Computer
Fruits 7.2
programming -21.4

Fishing 3.0 Manufacturing Real estate activities -6.0

-3.2

Vegetables Public administration

3.2 -1.7
and defense

Other perennial crops 8.9 Mining and Telecommunication -2.2

-22.3
quarrying
Animal production 1.8 Human health activities - 0.7

Sugar cane -7.6 Wholesale and retail 0.1

Electricity -2.3 trade
Tea -1.5 Education 1.8

Spices -1.7 Professional services 2.4

Water -17.6

Rubber -7.7 Insurance 26.0

Forestry and logging -7.3 Accommodation 26.0

Sewerage -0.4
Coconut -3.6 Transportation 3.9

(a) Based on the GDP estimates (base year 2015) Source: Department o f Census and Statistics

contraction in overall Services activities to 0.2 both private and government consumption
per cent in 2023. However, financial services expenditures, driven by the price impact. Despite
and real estate activities, which were largely the increase in investment expenditure during
affected by the high-interest-rate environment, the year, fixed capital formation contracted, led
particularly during the first half of the year, by the decline in expenditure on construction
and the continued contraction in computer activities. Further, the growth in expenditure
programming activities, weighed negatively on the on goods and services exports alongside the
growth of services activities during the year. stagnation in expenditure on goods and services
imports, resulted in a substantial improvement in
1.2.3 Expenditure net external demand.
From an expenditure perspective, the growth Considering expenditure estimates at
in the total demand of the economy at constant prices in 2023, consumption
current prices was contributed positively by expenditure contracted due to decreased
both domestic and net external demand. purchasing power, while investment
In terms of domestic demand, consumption expenditure contracted owing to the
expenditure, the dominant expenditure unfavourable investment climate. Meanwhile,
component, grew by 16.7 per cent, while the net external demand recorded a significant
investment expenditure grew by 1.6 per cent growth at constant prices during the year, helping
in 2023. The overall growth in consumption to limit the GDP contraction in real terms to
expenditure is attributable to the increase in 2.3 per cent.

16
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Table
Aggregate Demand and Savings at Current Market Prices (a)(b)

1
1.4

Rs. billion % Change As a Percentage of GDP

Item
2022 (c) 2023 2022 (c) 2023 2022 (c) 2023
1. Domestic Demand 24,921.2 28,042.4 31.8 12.5 103.6 101.5
1.1 Consumption 18,038.2 21,051.6 45.0 16.7 75.0 76.2
Private 16,311.0 19,158.5 51.3 17.5 67.8 69.3
Government 1,727.3 1,893.1 3.8 9.6 7.2 6.9
1.2 Investment (Gross Capital Formation) 6,883.0 6,990.8 6.4 1.6 28.6 25.3
Gross Fixed Capital Formation 5,724.1 4,859.6 23.4 -15.1 23.8 17.6
Changes in inventories and Acquisitions less 1,159.0 2,131.2 -36.7 83.9 4.8 7.7
disposals of valuables
2. Net External Demand -857.5 -412.7 34.1 51.9 -3.6 -1.5
Export of Goods and Services 5,187.9 5,634.2 74.1 8.6 21.6 20.4
Import of Goods and Services 6,045.4 6,046.9 41.2 0.0 25.1 21.9

3. Total Demand (GDP) (1+2) 24,063.8 27,629.7 36.6 14.8 100.0 100.0
4. Domestic Savings (3-1.1) 6,025.5 6,578.1 16.6 9.2 25.0 23.8
Private 7,566.0 8,228.9 17.1 8.8 31.4 29.8
Government -1,540.4 -1,650.9 -19.4 -7.2 -6.4 -6.0
5. Net Primary Income from Rest of the World (d) -631.2 -895.3 -59.6 -41.8 -2.6 -3.2
6. Net Current Transfers from Rest of the World (d) 1,159.4 1,836.2 12.1 58.4 4.8 6.6
7. National Savings (4+5+6) 6,553.7 7,519.0 12.8 14.7 27.2 27.2
8. Savings Investment Gap
Domestic Savings - Investment (4-1.2) -857.5 -412.7 -3.6 -1.5
National Savings - Investment (7-1.2) -329.3 528.2 -1.4 1.9
9. External Current Account Balance (2+5+6) (d) -329.3 528.2 -1.4 1.9
(a) Based on the GDP estimates (base year 2015) Sources : Department of Census and Statistics
(b) Provisional Central Bank of Sri Lanka
(c) Revised
(d) Any difference with the BOP estimates is due to the time lag in compilation.

In 2023, the country’s domestic savings income component of the economy, grew
grew by 9.2 per cent at current prices, while by 21.2 per cent at current prices during
national savings grew by 14.7 per cent. The the year, compared to the growth of 39.8
higher growth in national savings was attributable per cent recorded in 2022, accounting
to the notable increase in net current transfers for 37.9 per cent of Gross Value Added
from the rest of the world in rupee terms, while (GVA). Gross Mixed Income, the second largest
net primary income from the rest of the world income component, grew by 13.8 per cent in
continued to contract. As a percentage of GDP, 2023, compared to the growth of 43.4 per
domestic savings was recorded at 23.8 per cent cent in 2022. In terms of other major sources
in 2023, while national savings stood at 27.2 of income, Other Taxes less Subsidies on
per cent. Further, the national savings-investment Production continued to expand during the year,
gap turned positive in 2023, owing to relatively while Compensation of Employees, driven by the
higher growth in national savings compared Non-Financial Corporations (NFC), contracted
to investment, with the notable improvement in during the year. Considering the institutional
external sector performance. sector classification of GVA, NFC was the largest
income generator, followed by Household and
1.2.4 Income
Non-Profit Institutions Serving Households,
Considering the income estimates in 2023, Financial Corporations, and General
the Gross Operating Surplus, the largest Government, respectively.

17
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table Income Components by Economic Sector at Current Market Prices (a)(b)

1
1.5
Percentage Share (%)
2022 (c) 2023
Households House- Gross
Gross
Item Non- and Non- Financial General holds and Value
Financial General Value
Financial Non-Profit Financial Corpora- Govern- Non-Profit Added
Corporations Govern- Added at
Corporations Institutions Corporations tions ment Institutions at basic
ment basic price
Serving Serving price
Households Households
Compensation of Employees 48.2 10.3 23.4 18.1 27.0 44.7 11.1 23.7 20.6 23.8
Gross Operating Surplus 85.7 12.0 2.3 - 35.4 84.3 13.8 2.0 - 37.9
Gross Mixed Income - - - 100.0 37.3 - - - 100.0 37.6
Other Taxes less Subsidies on Production 71.2 11.1 - 17.7 0.2 64.1 14.6 - 21.3 0.7
Gross Value Added at basic price 43.5 7.1 7.1 42.3 100.0 43.0 7.9 6.4 42.6 100.0

(a) Based on the GDP estimates (base year 2015) Source : Department of Census and Statistics
(b) Provisional
(c) Revised

1.2.5 Population, Labour Force during the year. In 2023, the unemployed
and Employment population decreased marginally to 0.398 million
compared to 0.399 million in 2022. Further, the
As estimated by the Registrar General's employed population10 also decreased in 2023
Department, the mid-year population in to 8.010 million, compared to 8.148 million in
Sri Lanka in 2023 declined by 0.6 per cent the previous year.
to 22.037 million, due to a decrease in
births and increases in both deaths and net Departures for foreign employment remained
migration. In line with this decline in population, high, but recorded a decline of 4.3 per cent
the country’s population density decreased to 351 to 297,656 in 2023 from 311,056 in 2022.
people per square kilometre in 2023 from 354 The departures of males and females for foreign
people per square kilometre recorded in 2022. employment accounted for 55.3 per cent and
As shown in the Sri Lanka Labour Force 44.7 per cent, respectively, of the total departures
Survey conducted by the Department of for foreign employment during the year.
Census and Statistics (DCS), the economically
active8 population (labour force) decreased 10 Persons who worked at least one hour during the reference period, as paid employ-
ees, employers, own account workers or contributing family workers are said to be
to 8.408 million in 2023 from 8.547 employed. This also includes persons with a job but not at work during the reference
period.
million recorded in 2022. The Labour Force
Table Household Population, Labour Force
Participation Rate (LFPR), which is the ratio of the 1.6 and Labour Force Participation
labour force to the household population, also
Item 2022 2023 (a)
decreased to 48.6 per cent in 2023, compared
Household Population '000 Persons (b) 17,162 17,306
to 49.8 per cent in 2022. Labour Force '000 Persons 8,547 8,408
Employed 8,148 8,010
The unemployment rate remained Unemployed 399 398

unchanged at 4.7 per cent in 2023, Unemployment Rate 4.7 4.7

compared to the previous year, as a Male 3.7 3.6
Female 6.5 7.0
combined outcome of the decline in both the
unemployed population9 and labour force Labour Force Participation Rate (c) 49.8 48.6
Male 70.5 68.6
8 This is the current economically active population, i.e., the number of persons (aged 15 Female 32.1 31.3
years and above), who are employed or unemployed during the reference one-week
period. Source: Department of Census and Statistics
(a) Provisional
9 Persons available and/or looking for work, and who did not work and took steps to find (b) Household population aged 15 years and above
a job during the last four weeks and are ready to accept a job given a work opportunity (c) Labour force as a percentage of household population
within next two weeks are said to be unemployed.

18
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

1.2.6 Economic Infrastructure in the aftermath of the economic crisis and

1
the improved availability of fuel with the
Power and Energy
improved foreign currency liquidity status.
Petroleum Sales volumes of petroleum products recorded
a year-on-year growth of 7.1 per cent in
Although geopolitical tensions exerted
2023. Moreover, with the abatement of supply
upward price pressures during the latter
constraints, the Government took measures to
part of the year, the overall downward
relax demand management strategies, which
trend observed in global prices of crude oil
in 2023 together with the appreciation of were in place since mid 2022, by increasing the
the Sri Lanka rupee translated into lower weekly quotas under the National Fuel Pass QR
domestic prices of petroleum products, code system in the months of April and May 2023
compared to 2022. Global crude oil prices and subsequently abolishing these quotas with
recorded declines in 2023, when compared to effect from 01 September 2023.
2022, largely on account of subdued global
demand offsetting voluntary production cuts by CPC saw a significant turnaround in its
OPEC+ countries. Accordingly, the average financial performance during the year. The
Brent crude oil price decreased by 17.0 per cent implementation of the cost-reflective pricing
to US dollars 82.22 per barrel in 2023 from US formula paved the way to improve the financial
dollars 99.06 per barrel in 2022. In line with this performance of CPC, with the entity recording a
downward trend in global crude oil prices, the profit of Rs. 120.3 billion in 2023, in comparison
annual average import price of crude oil of the to the loss of Rs. 617.6 billion recorded in 2022.
Ceylon Petroleum Corporation (CPC) decreased At the end of 2022, the Government decided to
to US dollars 89.60 per barrel in 2023, while the transfer government guaranteed foreign currency
gradual appreciation of the Sri Lanka rupee also debt stock of CPC amounting to around US
supported the decline in import prices in rupee dollars 2.5 billion to the government balance
terms. Throughout the year, monthly adjustments sheet as a measure to improve the financial
were made to domestic prices of petroleum viability of CPC. The CPC’s outstanding trade
products in line with the cost-reflective pricing receivables from government entities decreased
formula. Consequently, by the end of the year, by Rs. 206.0 billion to stand at Rs. 17.7 billion by
the prices of Petrol 92, Auto Diesel, and Kerosene the end of December 2023, with the restructuring
retailed by the CPC recorded overall reductions of the CPC’s trade debt receivables from
of 6.5 per cent, 21.7 per cent, and 32.3 per SriLankan Airlines (SLA) and Ceylon Electricity
cent, respectively, compared to the end of 2022. Board (CEB) in December 2023. Meanwhile, the
However, further reductions were capped due settlement of dues from SLA and CEB enabled
to the imposition of an Excise Duty of Rs. 25.00
CPC to settle its liabilities in relation to the Indian
per litre, on imports of key refined petroleum
credit line by end December 2023.
products, in two rounds in January and June
2023 by the Government.11 Several reforms were undertaken in 2023
to liberalise the domestic petroleum
Petroleum sales increased in 2023, reflecting
market with the view of improving the
the gradual restoration of economic activity
competitiveness and efficiency of the
11 VAT exemptions on major petroleum products of Petrol 92, Petrol 95, Auto Diesel,
petroleum sector in Sri Lanka. In March 2023,
and Super Diesel were removed with effect from 01 January 2024, while the VAT
exemption on Kerosene was continued. the Cabinet of Ministers granted approval to

19
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

award contracts to three private companies for 2023. During the year, hydro, fuel, coal, and

1
the importation, storage, distribution, and sale Non-Conventional Renewable Energy (NCRE)
of petroleum products through a predetermined sources contributed to 29 per cent, 20 per cent,
dealer-operated distribution network in Sri Lanka. 30 per cent, and 21 per cent, respectively, of
Accordingly, two foreign suppliers commenced overall electricity generation.
their retail business operations in 2023 and in
Cost-reflective pricing in electricity resulted in
early 2024. Under the new arrangement, retail
improvements in the financial performance
prices of petroleum products sold by the CPC,
of CEB. In 2023, the Government established a
which are determined by the Ministry of Power
semi-annual tariff revision mechanism to address
and Energy through the cost-reflective pricing
the financial woes of CEB through cost-reflective
formula, serve as a ceiling price in the market
pricing. However, due to the volatility in the
and new suppliers may determine their prices
generation mix, electricity tariffs were revised three
subject to the same.
times during the year, with two upward revisions
Electricity in February and October, and a downward
revision in July 2023. Accordingly, the average
The daily scheduled power cuts that were
electricity tariff was revised upward by around
undertaken from February 2022 as a
66 per cent and 18 per cent, respectively, in
demand management strategy amidst fuel
February and October 2023, while it was revised
and coal shortages on account of foreign
downward by around 14 per cent in July 2023.
exchange liquidity crunch and the poor
Further, based on these developments, the
reservoir levels, were phased out and
Government decided to reduce the tariff revision
uninterrupted supply of electricity resumed
cycle to three months, commencing from the first
from mid-February 2023, supported by the
quarter of 2024. Accordingly, electricity tariffs
sufficient availability of thermal sources for
were revised downward effective from 05 March
electricity generation. Despite the favourable
2024. Regular tariff revisions contributed to a
statistical base impact stemming from a low level
notable improvement in CEB’s cash flow, leading
of electricity generation amidst scheduled power
to a sizeable profit of Rs. 61.2 billion in 2023,
outages in 2022, electricity generation witnessed
subsequent to recording continuous losses for
a year-on-year contraction of 2.2 per cent in
around seven years since 2016. This improved
2023. This reflected the weak energy demand
financial performance of CEB in 2023 was also
in the economy stemming from the combined
supported by the increased share of hydro in total
impact of cost-reflective electricity tariffs and
generation, particularly in the latter part of 2023.
subdued economic activity. The power sector
faced pressures during the second and third The Government initiated several policy
quarters of 2023 due to the delayed onset of the measures to reform the domestic power
South-West monsoon as a result of the sector with a view to improving its
El Niño effect. This resulted in an increased competitiveness and efficiency to cater to
usage of expensive thermal sources for electricity emerging demand. Amid the ongoing reforms
generation. However, this trend reversed towards of State Owned Business Enterprises (SOBEs),
the end of the third quarter of 2023, with the proposed new legislation for the power sector
improved reservoir levels amidst unusually high is expected to catalyse necessary reforms within
rainfall reported from the latter part of September the sector, thereby paving the way for an efficient

20
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.6 Energy and Power Sector Developments

1
Trends in Global Crude Oil Prices Revisions to Domestic Prices of Petroleum
Products of CPC
150 600

500

100 400

Rs./litre
99.06 82.22
USD/bbl

64.04 70.80 300

81.57
50 43.35 200

100

0 0

Jan-21
May-21
Sep-21
Jul-19

Jul-20

Jul-21

Jul-22

Jul-23
Jan-19
Apr-19

Jan-20
Apr-20

Jan-21
Apr-21
Oct-19

Jan-22
Apr-22

Jan-24
Oct-20

Jan-23
Apr-23
Oct-21

Jan-24
Oct-22

Jan-22
May-22
Sep-22
Oct-23

Jan-23
May-23
Sep-23
Jan-19
May-19
Sep-19
Jan-20
May-20
Sep-20
Brent WTI Petrol 90/92 Octane Petrol 95 Octane
Brent average for the relevant period Auto Diesel Super Diesel
Source: Bloomberg Source: Ceylon Petroleum Corporation

Electricity Generation Mix Average Costs and Average Tariffs of Electricity

100 80

80
60

60
Rs./Unit
Per cent

40

40

20
20

0 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2019 2020 2021 2022 2023

2019 2020 2021 2022 2023 Hydro (a) Coal (a)

Fuel Oil (a) NCRE (includes Mini Hydro) (a)
Hydro Fuel Oil Coal NCRE Average Cost (at Generation Point) Average Tariff
Average Cost (at Selling Point)
Source: Ceylon Electricity Board (a) Average cost at Generation Point Source: Ceylon Electricity Board

While the downward trend in global crude oil prices and appreciation of the Sri Lanka rupee translated into
lower domestic prices of petroleum products, electricity tariffs were higher on account of volatilities that were
observed in the generation mix during the year.

and financially viable sector that will ensure helped reduce the burden on the fiscal sector to
energy security. Moreover, the Government’s some extent. The improved financial performance
priority to diversify energy sources and expand of these key SOBEs has, however, reduced their
generation capacity through various power excessive reliance on the financial system. In turn,
projects, especially renewable energy initiatives, this is expected to enable the rechannelling of
which are financed through foreign investments, valuable resources of the financial system, that
is expected to facilitate the country’s commitment were previously locked in the losses of SOBEs,
to source 70 per cent of energy from renewable into productive sectors across the economy.
sources by 2030, while enabling the meeting of However, the Government’s commitment to
growing energy demand in a cost-effective and the continued implementation of cost-reflective
sustainable manner. Recent improvements in the pricing along with continued reforms towards
financial performance of CPC and CEB have diversification, improved competition, and

21
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

transparency across the power and energy sectors Other Developments

1
will be vital to preventing any crisis in these
Other infrastructure development activities
sectors in the future.
gradually resumed in 2023. The Colombo
Transport Sector Port City reached the final stages in relation to
Phase I, pertaining to the construction of ground
During the year, transportation activities
infrastructure, including roads and utilities, and
regained their momentum as fuel availability
is expected to attain completion by mid-2024.
normalised and economic activity began
Further, several measures were undertaken during
to recover. The operations of the Sri Lanka
the year to continuously strengthen the legal
Transport Board (SLTB), in terms of operated
framework of the Colombo Port City, and a key
kilometrage, reported a year-on-year growth
milestone in this regard was the establishment of
of 11.2 per cent, while passenger kilometrage
the International Commercial Dispute Resolution
reported a contraction of 4.6 per cent during the
Centre. Infrastructure development activities
year. Meanwhile, both passenger kilometrage and
in the Port of Colombo pertaining to the East
operated kilometrage of private bus operators
Container Terminal Phase II and West Container
witnessed notable year-on-year growth rates of
Terminal Phase I continued during the year and
23.7 per cent and 94.3 per cent, respectively,
are expected to enable capacity expansion by
in 2023. In the rail transportation sector, the
around 6 million TEUs by 2027. During the year,
estimated passenger kilometrage and goods
through the Urban Infrastructure and Township
kilometrage recorded year-on-year increases of
Development Programme Siyak Nagara, the
6.7 per cent and 15.0 per cent, respectively, in
Urban Development Authority completed several
2023. Across the civil aviation sector, there were
regional development projects that sought
7.5 million passenger movements (excluding
to convert regional town centres into citizen
transit passengers) in 2023, reflecting a notable
centric cities, including those in Nuwara Eliya,
year-on-year growth of 35.8 per cent. However,
Kurunegala, and Galle. The National Housing
cargo handling recorded a contraction of 5.0 per
Development Authority took steps to restart the
cent during the year. Meanwhile, the Government
Mihindupura housing project under a public-
continued the restructuring of SLA with the calling
private partnership in 2023. Several water supply
for Expressions of Interest from potential investors
projects were completed during the year by the
for the divestiture of SLA in October 2023. The
National Water Supply and Drainage Board.
port sector, which experienced a significant
Meanwhile, initiatives under the DIGIECON
setback in early 2023, gathered pace during
2030 programme of the Government were also
the period thereafter supported by the gradual
underway, and these are expected to contribute to
relaxation of import restrictions and increased
the acceleration of Sri Lanka’s transformation into
trade activity. Accordingly, container handling
a digital economy.
and cargo handling activities reported year-
on-year growth rates of 1.3 per cent and 3.4 1.2.7 Social Infrastructure
per cent, respectively, while ship arrivals also
Education
recorded a year-on-year growth of 18.4 per cent
in 2023. This positive performance was also Despite the seeming return to normalcy,
driven by the surge in transshipment volumes due inequalities in the education system which
to the diversion of vessels away from the Red Sea, were aggravated during the crisis period
particularly towards the latter part of the year. remain unaddressed. Education sector

22
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

activities recommenced ‘in-person’ in 2023 after (105,049 cases). Further, Sri Lanka reported

1
approximately three years of hybrid learning, 62 imported malaria cases in 2023 raising
with the dissipation of disruptions caused by concerns about a potential malaria resurgence.
the COVID-19 pandemic and the economic Recent nutrition related indicators highlight the
crisis. The Government continued to conduct disconcerting and worsening nutritional status
all national level exams, despite the delay of an of the country, particularly among children
academic year continuing to remain unaddressed and women, amid existing socioeconomic
resulting in two overlapping batches of students challenges and particularly among those
for Grades 11 and 13 with those facing the exam belonging to vulnerable groups. In this context,
potentially disadvantaged in terms of availability authorities continued to provide child nutrition
of resources to them from their respective schools. services during the year with the collaboration
As per the findings of the survey of the DCS, of development partners in an attempt to curb
schooling of 54.9 per cent of individuals aged the long lasting impact of such issues. However,
3-21 years has been affected by the crisis. In a more comprehensive and better targeted
light of this, the Government continued to invest strategy is essential in this regard as the effects
in student welfare and subsidy programmes of malnutrition are long term and can trap
during 2023 with a view to minimising student individuals across generations in the vicious circle
dropout from school education, and improving of poor productivity and thereby, poverty.
access to and participation in quality education. Lapses in the health sector are becoming
These measures include the continuation of increasingly disconcerting raising serious
the school meal programme, provision of free concerns about the efficacy of the sector.
textbooks, and free school uniforms and school Service delivery in the public health sector had
shoes. However, it must be reiterated that these been severely impacted by the economic crisis
measures can only mitigate the scarring impact of with the foreign exchange liquidity affecting
the aftermath of the crisis on academic outcomes, the procurement of medicines and required
especially among the vulnerable segments of equipment, alike. While pressures in this regard
the population for whom education is of even have been alleviated to a great extent, issues
more importance to break generational cycles of pertaining to the quality of medicines have been
vulnerability and poverty. recurring regularly in recent times on account of
poor quality controls and the lack of a stringent
Health
regulatory mechanism in relation to the same.
The health sector continued to grapple with Further, there are growing concerns of negligence
the burden of both communicable and non- in the provisioning of health services. Both
communicable diseases, facing additional aforementioned developments have resulted in
financial strains to treat these diseases casualties which are reprehensible in light of the
amid limited resources, necessitating country’s long standing commitment to universal
comprehensive strategies and resources for health care. These developments threaten to
efficient management and prevention of underestimate the health outcomes that have
these diseases. In 2023, the number of dengue been achieved thus far. This underscores the
cases in Sri Lanka increased substantially, with critical need to focus on strengthening the
the country reporting its third largest outbreak of country’s healthcare system, as it is an essential
89,799 cases, following the substantially large pillar of the human capital base of the economy.
outbreaks in 2017 (186,101 cases) and 2019 In addition to urgent prioritisation of adequate

23
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

budgetary allocations for investments in the outset, around 1.4 million applicants out of

1
health sector, stringent regulatory mechanisms 3.7 million applicants were selected to receive
at every stage of the supply chain pertaining to benefits under four major categories, namely,
pharmaceutical products and medical equipment transitional, vulnerable, poor, and severely poor,
are of utmost importance considering that as classified under the Aswesuma programme.
the sector deals with the wellbeing and lives Further, several measures were taken to
of individuals. The timely implementation of strengthen the selection criteria, along with data
sustainable health financing policy is also an recertification and verification procedures as well
essential measure that needs to be undertaken as regular reviews, to improve the targeting of the
in the short term. Over the medium term, programme. Under this programme, around Rs.
sustainable healthcare provisioning will hinge 53.8 billion was disbursed in 2023. Meanwhile,
on the active encouragement of public-private the Cabinet granted approval in July 2023 to
partnerships in relation to not only service delivery continue the Samurdhi Subsidy Programme
but also other aspects of healthcare provisioning, until the appeal process under the new benefit
including infrastructure development, production scheme was completed. Accordingly, as at end
of medicines and medical equipment and 2023, the number of beneficiary families under
even research and development in this sector. the Samurdhi Programme stood at 363, 214
Meanwhile, there is also an urgent need for families compared to 1.7 million families at the
action to address issues pertaining to the loss of beginning of the year. While the Government’s
human capital as well as the lack of infrastructure efforts to improve the efficacy of social assistance
for the production of necessary personnel to programmes are commendable, the lack of post
ensure that achievements made thus far are not crisis national statistics on the status of poverty,
wounded by these recent developments. vulnerability and inequality is disconcerting as
Social Safety Nets it hinders timely poverty alleviation and social
assistance efforts.
Considering the disproportionate and
prolonged effect of the economic crisis on 1.3 Monetary Sector
vulnerable households, measures were taken Developments
to strengthen the country’s social safety nets 1.3.1 Domestic Money Market
in line with the macroeconomic adjustment Liquidity and Short Term
programme under the IMF-EFF. Accordingly, Interest Rates
the Aswesuma welfare benefit scheme was
initiated in July 2023 under the purview of the Overnight liquidity in the domestic money
Welfare Benefits Board (WBB) with the intention market improved notably in 2023 from
of replacing the Samurdhi Development deficit levels to broadly balanced levels.
Programme. The programme was designed after Liquidity provision to the market through
developing the welfare benefit information system, term reverse repo auctions under open
considering multidimensional parameters, with market operations (OMO), in addition to the
an improved verification approach to ensure overnight liquidity provision, in line with the
the effective targeting of needy sectors, while accommodative monetary policy stance and
providing opportunities for appeals in the event provision of special liquidity assistance to certain
of non-inclusion in the benefit scheme. At the licensed banks, which had experienced persistent

24
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

liquidity deficits were the measures taken by March 2024. The asymmetric distribution of

1
the Central Bank to improve market liquidity. In liquidity among LCBs continued, with foreign
addition, substantial net purchases of foreign banks maintaining large liquidity surpluses. In
exchange by the Central Bank also released response to the easing of the monetary policy
rupee liquidity. Further, the reduction of the stance14 and the gradual improvements in
Statutory Reserve Ratio (SRR) applicable on all domestic money market liquidity conditions, the
rupee deposit liabilities of Licensed Commercial Average Weighted Call Money Rate (AWCMR),15
Banks (LCBs) by 200 basis points to 2.00 per cent which hovered around the upper bound of the
with effect from 16 August 2023 Standing Rate Corridor (SRC) during the period
injected additional liquidity of around of significantly tight monetary policy, adjusted
Rs. 200 billion into the domestic money market. downwards towards the lower bound of SRC.
Consequently, domestic money market liquidity, In turn, this facilitated the overall downward
which remained in deficit, on average, of around adjustment in the market interest rate structure.
Rs. 450 billion during 2022, improved to an
1.3.2 Market Interest Rates
average deficit of around Rs. 70 billion during
2023. Overnight liquidity remained volatile Market interest rates declined significantly
during the period under consideration due to in 2023 from notably high levels recorded
restrictions imposed on the Standing Facilities by in 2022. The reduction of market interest rates
the Central Bank.12 However, the volatility and was driven by the accommodative monetary
uncertainty on liquidity are expected to normalise policy measures implemented since June
in the period ahead as a result of the removal of
2023, supported by several other factors.16
the aforementioned restrictions13 in February/
Administrative measures and moral suasion
that targeted the reduction of excessive
12 Effective from the reserve maintenance period commencing 16 January 2023,
the Standing Deposit Facility (SDF) was limited to a maximum of five (5) times per market interest rates supported by the rapid
calendar month, while the Standing Lending Facility (SLF) was limited to 90% of the
Statutory Reserve Ratio (SRR) of each LCB on any given day. disinflation process and moderation of inflation
13 The restrictions on the Standing Facilities were relaxed/ removed in two stages.
Initially, with effect from the reserve maintenance period commencing 16 February expectations, and the decrease in risk premia
2024, the restriction on SLF was removed and the restriction on SDF was relaxed
from five times (5) to ten times (10) during a calendar month. Finally, the remaining
restriction on SDF was removed with effect from the reserve maintenance period
attached to yields on government securities
commencing 01 April 2024.
following the Domestic Debt Optimisation
Figure Key Policy Interest Rates, AWCMR and (DDO) operation are other important factors
1.7 Overnight Money Market Liquidity
18 300
that contributed to the broad based reduction
17
16
200 in market lending rates. The administrative
15
14
100
measures introduced in August 2023 to reduce
13 0
12 excessive lending interest rates, and broader
Rs. billion

-100
11
Per cent

10 -200 guidelines that were introduced to induce a

9
8
-300 gradual reduction in other market lending
7 -400
6
5 -500
4 14 Since the commencement of the monetary policy easing cycle in June 2023, policy
-600 interest rates of the Central Bank were reduced by 650 basis points in 2023, and a
3
further 50 basis points thus far in 2024, totalling a cumulative reduction of 700 basis
2 -700
points.
Nov-22
Mar-22

Nov-23
Jan-22

Mar-23
May-22

Jan-23
Sep-22
Jul-22

May-23

Sep-23
Jul-23

Mar-24
Jan-24

15 The short term interest rate closely monitored by the Central Bank as the operating
target to guide the market interest rates under the Flexible Inflation Targeting (FIT)
SDFR SLFR framework.
AWCMR Overnight Liquidity (RHS) 16 The Central Bank increased its policy interest rates by 100 basis points in March 2023
Average Liquidity for the Reserve Maintenance Period (RHS) marking it as the last policy interest rate hike in the tight monetary policy cycle which
Source: Central Bank of Sri Lanka started in August 2021.

25
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

interest rates on rupee loans and advances the lending interest rate based on all outstanding

1
during the latter part of the year resulted in rupee loans and advances extended by LCBs
a decline in market lending rates reflecting (Average Weighted Lending Rate (AWLR)),
an appreciable passthrough. Market lending and the lending interest rate based on all new
interest rates displayed some downward rupee loans and advances extended by LCBs
stickiness as yields on government securities (Average Weighted New Lending Rate (AWNLR))
remained at relatively elevated levels. The during a particular month declined by 4.49
interest rates based on the outstanding stock and 11.82 percentage points, respectively, in
of interest bearing rupee deposits held with 2023. The interest rates applicable on loans to
LCBs (Average Weighted Deposit Rate (AWDR) Small and Medium Sized Entrepreneurs (SMEs)
and Average Weighted Fixed Deposit Rate also declined during the year in line with the
(AWFDR)) declined by a range of 2.42 – 3.61 moderation of other market lending interest
percentage points, while the interest rates on rates. Accordingly, the interest rate based on all
new interest-bearing rupee deposits mobilised outstanding rupee loans and advances extended
by LCBs (Average Weighted New Deposit Rate by licensed banks to the SME sector (Average
(AWNDR) and Average Weighted New Fixed Weighted SME Lending Rate (AWSR)) and the
Deposit Rate (AWNFDR)) during a particular interest rate based on all new rupee loans and
month declined by a range of 12.01 – 12.40 advances extended by licensed banks during
percentage points during 2023. Lending rates, a particular month to the SME sector (Average
particularly interest rates applicable on short Weighted New SME Lending Rate (AWNSR))
term rupee loans and advances granted by LCBs declined by 5.40 and 11.95 percentage points,
to their prime customers during a particular respectively. Although, there was an overall
week (Average Weighted Prime Lending Rate reduction in lending interest rates to SMEs,
(AWPR)), which is one of the benchmark interest interest rates charged from SMEs remained
rates in the retail market, declined notably by relatively high, particularly for smaller loans, due
15.11 percentage points in 2023. Meanwhile, to the nature of lending and risks associated.

Figure
1.8 Movement of Selected Market Interest Rates

Deposit Rates 30
Lending Rates
26

24 28
26
22
24
20
22
18 20
Per cent
Per cent

16 18

14 16
14
12
12
10
10
8 AWDR AWFDR AWPR (Monthly) AWLR
8
AWNLR AWNSR
6 AWNDR AWNFDR
6 AWSR
4 4
Jan-22
Feb-22
Mar-22
Apr-22
May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Jan-22
Feb-22

May-22
Jun-22
Jul-22
Aug-22
Sep-22
Oct-22
Nov-22
Dec-22
Jan-23
Feb-23

May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-22
Apr-22

Mar-23
Apr-23

Mar-24

Source: Central Bank of Sri Lanka

26
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

The downward trend in market interest rates Table

1.7 Movements of Interest Rates

1
continued in early 2024, highlighting the space Per cent per annum
End 2023 Change
available for market interest rates to decline Interest Rate End 2022 in % pts
Key Policy Interest Rates
further in response to accommodative monetary Standing Deposit Facility Rate (SDFR) 14.50 9.00 -5.50
Standing Lending Facility Rate (SLFR) 15.50 10.00 -5.50
conditions. In spite of these developments, real Average Weighted Call Money Rate (AWCMR)
Yield Rates on Government Securities
15.50 9.24 -6.26

market interest rates remained positive, given the Primary Market (a)
Treasury bills
low level of inflation, indicating that monetary 91-day
182-day
32.64
32.20
14.51
14.16
-18.13
-18.04
364-day 29.27 12.93 -16.34
conditions from an interest rate perspective Treasury bonds
2-year 33.01 (b) 13.87 (c) -19.14
remained somewhat tight. Meanwhile, interest 3-year 31.36 (b) 14.07 (c) -17.29
4-year - 14.21 (c) -
rates offered on foreign currency deposits 5-year 31.78 (b) 14.32 (c) -17.46
10-year 30.86 (b) - -
recorded a moderation during 2023 compared Secondary Market
Treasury bills
to the previous year owing to improvements in 91-day 30.75 14.13 -16.62
182-day 29.50 13.86 -15.64
foreign exchange balances in the banking sector 364-day 28.39 12.71 -15.68
Treasury bonds
supported by inflows from the merchandise 2-year 28.19 13.52 -14.67
3-year 28.32 13.62 -14.70
and services sector exports as well as workers’ 4-year
5-year
27.60
26.78
13.66
13.74
-13.94
-13.04
remittances, although the global stance of 10-year
Interest Rates on Deposits
26.18 13.10 -13.09

Licensed Commercial Banks (d)

monetary policy remained tight. Savings Deposits 0.25-6.00 0.25-13.00 -
1 Year Fixed Deposits (e) 4.50-30.00 1.00-22.00 -
Yields on government securities, which AWDR (f)
AWFDR (f)
14.06
18.49
11.64
14.88
-2.42
-3.61

declined notably with the announcement of AWNDR (f)

AWNFDR (f)
23.07
23.73
11.06
11.33
-12.01
-12.40
Other Financial Institutions (g)
the DDO operation in July 2023, reduced National Savings Bank
Savings Deposits 3.00 3.00 -
further underpinned by the easing of 1 Year Fixed Deposits 12.00 8.00 -4.00
Licensed Finance Companies (h)
monetary policy and the gradual dissipation Savings Deposits 4.63-8.03 4.33-6.62 -
1 Year Fixed Deposits 20.48-27.15 11.88-13.56 -
of risk premia associated with government Interest Rates on Lending
Licensed Banks (i)
securities. Further, fiscal consolidation efforts AWSR 20.73 15.33 -5.40
AWNSR 26.91 14.96 -11.95
and improvement in government revenue, the Licensed Commercial Banks (d)
AWPR (Monthly) 28.19 12.39 -15.80
buildup of buffer funds for cashflow operations AWLR 18.70 14.21 -4.49
AWNLR 26.20 14.38 -11.82
by the Government, the deceleration of inflation Licensed Specialised Banks (g)
National Savings Bank 28.00-32.00 15.00-20.00 -
and reduction in inflation expectations, and State Mortgage and Investment Bank (j)
Licensed Finance Companies (h)
18.00-27.25 9.50-21.00 -

improved market sentiments also supported Finance Leasing

Loans against Immovable Properties
21.53-35.37 14.98-32.48
26.80-28.43 14.18-23.86
-
-
Corporate Debt Market
the normalisation of yields on government Debentures 15.42-28.00 13.50-29.50 -
Commercial Papers
securities. Accordingly, yields on Treasury bills 11.00-36.00 17.00-26.50 -
(a) Weighted average yield rates at the latest Sources: Respective Financial Institutions
across all maturities decreased by 16.34 – available auction
(b) Last primary auction during 2022:
Colombo Stock Exchange
Central Bank of Sri Lanka
2 yr - 13 Dec | 3 yr - 29 Dec |
18.13 percentage points during 2023, while 5 yr - 28 Oct | 10 yr - 11 Nov
(c) Last primary auction during 2023:
Treasury bond yields also moderated. In the 2 yr - 28 Dec | 3 yr - 12 Dec | 4 yr - 28 Dec | 5 yr - 12 Dec
(d) Based on the rates quoted by LCBs
(e) Maximum rate is a special rate offered by certain LCBs
meantime, the secondary market yield curve, (f) Since July 2018, AWDR and AWFDR were calculated by replacing senior citizens’ special
deposit rate of 15% with relevant market interest rates to exclude the impact of special rates.
which had shown unusual movements since Same method was applied to calculate AWNDR and AWNFDR since June 2018. However,
senior citizens’ special deposit rate of 15% was discontinued from 01.10.2022.
(g) Based on the rates quoted by other selected Financial Institutions
April 2022 triggered by uncertainties that arose (h) Interest rate ranges are based on the average maximum and average minimum rates quoted
by LFCs which are applicable for deposits mobilised and loans granted during the respective
from domestic debt restructuring concerns and months. Data for 2023 are provisional
(i) Based on the rates quoted by LCBs and LSBs
(j) Lending for housing purposes only
the heightened borrowing requirement of the

27
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure Secondary Market Yield Curve for by LCBs experienced an unexpected monthly
1.9 Government Securities

1
contraction in January 2024 (a contraction of
32
Rs. 52.2 billion) partly due to the advancing of
28
spending in view of the implementation of VAT
24
adjustments effective January 2024 and the
20
Per cent

settlement of short term borrowings obtained by

16
businesses during the end-year festive season.
12
Further, the valuation impact arising from the
8 appreciation of the Sri Lanka rupee exacerbated
4 the contraction in January 2024. Nevertheless,
12 Years
11 Years

13 Years

15 Years
14 Years
10 Years
2 Years

7 Years
3 Years

5 Years
4 Years

9 Years
8 Years
6 Years
1 Year

credit to the private sector expanded in February

End 2021 End 2022 2024 to some extent and is anticipated to
End 2023 End Mar 2024
Source: Central Bank of Sri Lanka
expand in the period ahead, aligning with the
Government, continued to exhibit a double envisaged further reduction in market interest
humped inverted yield curve during the most rates and improvements in economic activity.
part of 2023. However, with the moderation of Meanwhile, credit to the private sector by
yields on government securities following the Licensed Specialised Banks (LSBs) contracted
DDO operation and improved fiscal outturn, it by Rs. 32.9 billion during 2023, recording a
transitioned to a normal upward sloping yield year-on-year contraction of 2.8 per cent by end
curve since early 2024. 2023 amidst relatively tight liquidity conditions
of those banks and comparatively high interest
1.3.3 Credit Aggregates rates. Private sector credit by Licensed Finance
The turnaround of credit to the private Companies (LFCs) also contracted by Rs. 24.2
sector by LCBs recorded in June 2023 ended billion during 2023, recording a year-on-year
the longest streak of monthly contractions contraction of 1.8 per cent by the end of 2023.
of credit to the private sector. The turnaround Credit to the major sectors of the economy17
was supported by the gradual relaxation of suffered contractions during the first
the monetary policy stance and improvements half of 2023 but commenced recovering
in economic activity and market sentiments. thereafter. During the year, an improvement
Accordingly, the cumulative increase in was observed in credit extended to productive
outstanding credit to the private sector by LCBs sectors, excluding credit to the Industry sector,
during June-December 2023 was Rs. 367.4 which experienced a setback. Accordingly, on a
billion. Despite the recovery during the second year-on-year basis, credit to the Agriculture and
half of 2023, credit to the private sector by LCBs Services sectors grew by 0.9 per cent and 2.1
recorded a cumulative contraction of
per cent, respectively, during 2023. Within the
Rs. 45.0 billion during 2023, registering a
Agriculture sector, the tea, paddy, and fisheries
year-on-year contraction of 0.6 per cent by end
subsectors recorded credit expansions during
2023 compared to the growth of 6.2 per cent
the year, reflecting a broad based expansion in
(year-on-year) recorded at end 2022. However,
17 Findings are based on the Quarterly Survey on Loans and Advances extended to the
the increasing trend in credit to the private sector Private Sector by LCBs.

28
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.10 Credit Extended to the Private Sector by LCBs

1
Monthly Change in Credit vs Growth (Y-o-Y) Growth of Sectoral Credit (Y-o-Y)
(As per the Quarterly Survey of Loans and Advances by LCBs)
300
500 30

250 25 25

200 20 20

150 15 15
Rs. billion

100 10 10

Per cent

Per cent
50 5 5
0.9 2.1
0.9
0 0 0 -0.2

-50 -5 -5 -5.6

-100 -10 -10

-150 -15 -15

Nov-22
Jan-22

Jun-22

Sep-23

Mar-22

Jun-22

Sep-22

Dec-22

Mar-23

Jun-23

Sep-23

Dec-23
Apr-23

Feb-24

% Share of total (Dec-23)

Agriculture & Fishing 8.7
Monthly change
Industry 39.4
Y-o-Y Growth (RHS) Services 27.7
Personal Loans and Advances 24.2
Source: Central Bank of Sri Lanka

agriculture activities. In the Services sector, the although a resumption was observed in the
wholesale and retail trade, communication and second half of the year driven by the substantial
information technology, and shipping, aviation increase in pawning related credit, which has
and freight forwarding subsectors recorded been growing continuously since the onset of
expansions in credit during the year, showing COVID-19.
signs of a rebound in service related economic
Credit obtained by SOBEs from the banking
activity in the economy. However, credit
system contracted in 2023, in contrast to
granted to the Industry sector remained weak
the notable expansion recorded during
on account of the construction subsector being
2022. Credit to SOBEs by LCBs contracted by
severely affected by the lack of government
Rs. 979.9 billion during 2023 mainly due to
and private sector projects stemming from
the Government taking over the government
fiscal constraints, rising raw material prices,
guaranteed foreign currency debt obligations
and associated finance costs due to the high
of CPC, provided by LCBs, and improved
interest rate environment in 2022 and early
financial performance of key SOBEs following
2023. A contraction in credit was also observed
the implementation of cost-reflective price
across the textiles and apparel, and food
adjustments thus reducing their reliance on bank
and beverages subsectors, followed by some
financing.
recovery during the second half of the year.
However, on a year-on-year basis, credit to the Net Credit to the Government (NCG) by
Industry sector contracted by 5.6 per cent in LCBs continued to increase in 2023 as
2023. Meanwhile, credit extended in the form the banking system was one of the main
of personal loans and advances suffered a sources of domestic financing of the
marginal contraction of 0.2 per cent in 2023, Government. NCG by the banking system

29
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

increased by Rs. 813.9 billion during 2023 but on the Financial Survey (M4)18 amounted to

1
remained lower than the expansion recorded Rs. 1,038.6 billion during 2023, of which
during 2022 (an expansion of Rs. 1,638.7 Rs. 140.7 billion was through LSBs and
billion). NCG by LCBs recorded an increase of Rs. 84.0 billion was through LFCs.
Rs. 1,870.1 billion during the year reflecting
1.3.4 Money Aggregates
the increase in investments in government
securities by LCBs amidst the reduction in credit Reserve money recorded a marginal
provided to the private sector, and the transfer contraction in 2023, although high volatility
of government guaranteed outstanding foreign was observed in its levels since early
currency debt of CPC to the Government. In 2023 due to the impact of administrative
contrast, NCG by the Central Bank recorded measures taken by the Central Bank to
a significant reduction of Rs. 1,056.3 billion reduce the overdependence of LCBs on the
during 2023 mainly due to the offloading of standing facilities of the Central Bank. The
Treasury bills held by the Central Bank and restricted access to Standing Deposit Facility
reduction in the use of SLF of the Central Bank (SDF) resulted in LCBs maintaining large excess
by LCBs with the gradual improvements of the reserves with the Central Bank at irregular
liquidity position of LCBs. The reduction in intervals. This created daily volatility in LCBs’
NCG by the Central Bank was partly due to the deposits with the Central Bank causing reserve
restrictions on monetary financing introduced money to be volatile. With the reduction in SRR
in the Central Bank of Sri Lanka Act, No. 16 by 200 basis points in August 2023, LCBs’
of 2023 (CBA), which prohibited monetary deposits with the Central Bank declined notably,
financing and created a commitment to reduce although volatility continued as restrictions were
the government securities holding of the Central still in force during 2023. Meanwhile, currency
Bank. Meanwhile, the expansion of NCG based in circulation, which declined significantly after
the festival season of April 2023, recorded
some expansion towards end June 2023, mainly
Figure Annual Change in NCG from the
1.11 Banking System (a) reflecting the uncertainties surrounding the DDO
2,000 operation. However, with the public gaining
1,800
1,600 greater clarity on DDO, a return of currency to
1,400
1,200 the banking system was observed since mid-July
1,000
800 2023, albeit moderately. As in the past, currency
600
Rs. billion

400 in circulation increased notably towards the end

200
0 of the year due to festive demand, although part
-200
-400 of the seasonal demand for currency returned
-600
-800 to the banking system. However, currency in
-1,000
-1,200 circulation continued to increase thereafter
2021
2014

2022
2015

2023
2016

2018

2019
2017

2020

as the preference to hold currency remained

LCBS
Central Bank
Net Credit to the Government elevated as recent tax related measures are
(a) With the approval of the Cabinet of Ministers at its meeting held on 30 January 2023, the
outstanding foreign currency guaranteed debt of CPC was absorbed into central government debt likely to have increased cash based transactions,
with effect from December 2022. Accordingly, this adjustment was implemented in two phases,
first in April 2023 and subsequently in December 2023, hence, was reflected in the balance sheets
of the particular state owned commercial banks, which caused a reduction in credit to public
corporations/ SOBEs and a corresponding expansion in NCG. 18 The Financial Survey provides a broader measure of money supply, covering all
deposit taking institutions, including LSBs and LFCs, in addition to LCBs and the
Source: Central Bank of Sri Lanka Central Bank.

30
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Table
Developments in Money Aggregates
1.8

1
Rs. billion
End End End End End
Item
2019 2020 2021 2022 2023 (a)
1. Reserve Money 933 964 1,306 1,349 1,329
(% change Y-o-Y) -3.0 3.4 35.4 3.3 -1.5
Net Foreign Assets of the Central Bank 896 527 -387 -1,614 -837
Net Domestic Assets of the Central Bank 37 438 1,693 2,963 2,166
2. Narrow Money (M1) 865 1,177 1,460 1,454 1,658
(% change Y-o-Y) 4.2 36.0 24.0 -0.4 14.1
3. Broad Money (M2b) 7,624 9,406 10,647 12,290 13,189
(% change Y-o-Y) 7.0 23.4 13.2 15.4 7.3
3.1 Net Foreign Assets (NFA) 101 -209 -982 -1,767 -456
Monetary Authorities (b) 896 527 -387 -1,614 -837
Licensed Commercial Banks (LCBs) -795 -736 -595 -153 381
3.2 Net Domestic Assets (NDA) 7,523 9,615 11,629 14,056 13,645
Domestic credit 9,411 11,721 14,002 16,632 16,421
Net Credit to the Government (NCG) 2,796 4,548 5,832 7,471 8,285 (c)
Central Bank 363 869 2,094 3,432 2,376
Licensed Commercial Banks (LCBs) 2,433 3,679 3,738 4,039 5,909
Credit to Public Corporations / SOBEs 818 1,002 1,188 1,750 (d) 770 (c)
Credit to the Private Sector 5,797 6,171 6,981 7,411 (d) 7,366
(% change Y-o-Y) 4.2 6.5 13.1 6.2 -0.6
Other Items (net) -1,887 -2,106 -2,373 -2,576 -2,776
4. Broad Money (M4) 9,445 11,462 12,985 14,840 15,829
(% change Y-o-Y) 8.2 21.4 13.3 14.3 6.7
4.1 Net Foreign Assets (NFA) 89 -217 -999 -1,767 -456
Monetary Authorities (b) 896 527 -387 -1,614 -837
Licensed Commercial Banks (LCBs) -795 -736 -595 -153 381
Licensed Specialised Banks (LSBs) -12 -8 -17 0 0
4.2 Net Domestic Assets (NDA) 9,356 11,679 13,984 16,607 16,285
Net Credit to the Government (NCG) 3,483 5,366 6,769 8,469 9,507 (c)
Central Bank 363 869 2,094 3,432 2,376
Licensed Commercial Banks (LCBs) 2,433 3,679 3,738 4,039 5,909
Licensed Specialised Banks (LSBs) 614 742 845 881 1,022
Licensed Finance Companies (LFCs) 73 75 92 116 200
Credit to Public Corporations / SOBEs by (LCBs) 818 1,002 1,188 1,750 (d) 770 (c)
Credit to the Private Sector 7,793 8,285 9,339 9,917 (d) 9,815
(% change Y-o-Y) 3.9 6.3 12.7 6.2 (1.0)
Licensed Commercial Banks (LCBs) 5,797 6,171 6,981 7,411 (d) 7,366
Licensed Specialised Banks (LSBs) 814 936 1,094 1,159 1,126
Licensed Finance Companies (LFCs) 1,182 1,177 1,264 1,347 1,323
Other items (net) -2,738 -2,973 -3,312 -3,529 -3,807
Memorandum Items:
Money Multiplier (M2b ) 8.18 9.75 8.15 9.11 9.93
Velocity (M2b average) (e) 2.16 1.84 1.73 2.04 (d) 2.19

(a) Provisional Source: Central Bank of Sri Lanka

(b) This includes NFA of the Central Bank as well as the Government's Crown Agent's balance reported by the Department of State
Accounts
(c) With the approval of the Cabinet of Ministers at its meeting held on 30 January 2023, the outstanding foreign currency guar-
anteed debt of the Ceylon Petroleum Corporation (CPC) was absorbed into central government debt with effect from December
2022. Accordingly, this adjustment was implemented in two phases, first in April 2023 and subsequently in December 2023,
hence, was reflected in the balance sheets of the particular state owned commercial banks, which caused a reduction in credit to
Public Corporations/ SOBEs and a corresponding expansion in Net Credit to the Government (NCG).
(d) Revised
(e) Based on rebased GDP estimates (base year 2015) by the Department of Census and Statistics

31
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure Contribution to Y-o-Y Growth of placements by LCBs, which led to the expansion
1.12 Broad Money (M2b)

1
of other items (net). Meanwhile, NFA of the
40
35 Central Bank, which turned negative in August
30
2021, gradually improved in 2023, reflecting
25
20 the combined effect of increased foreign assets
15
with the accumulation of foreign reserves and
10
Per cent

5
6.4 decreasing foreign liabilities of the Central
0
-1.7 Bank. During 2023, NFA of the Central Bank
-5
-10
improved by Rs. 776.5 billion, albeit remaining
-15 negative by the end of the year.
-20
-25 Despite the expansions recorded in NCG
Jan-22

Nov-22
Jul-22
Mar-22

Jan-23

Nov-23
Jul-23
Sep-22

Mar-23
May-22

Sep-23

Jan-24
May-23

and NFA of the banking system, the growth

Net Foreign Assets Credit to the Private Sector of broad money (M2b) supply remained
Credit to Public Corporations/ Net Credit to the Government
SOBES
Other Items (net)
Broad Money (M2b) growth moderate during 2023 mainly due to the
Domestic credit growth Source: Central Bank of Sri Lanka contractions recorded in credit extended by
together with lower opportunity cost of holding LCBs to the private sector and SOBEs. NFA
currency due to reduced deposit interest of the banking system improved notably by
rates. Accordingly, reserve money contracted Rs. 1,310.7 billion during 2023 due to the
marginally to Rs. 1,328.7 billion by end 2023, decline in foreign liabilities and the build-up
recording a year-on-year contraction of 1.5 of foreign assets, reflecting an improvement in
per cent. Meanwhile, with the relaxation of the external sector performance and gross official
restrictions imposed on the standing facilities in reserves (GOR). Settlement of foreign currency
February and March 2024, the volatility of daily liabilities by the Central Bank as well as LCBs,
reserve money reduced somewhat. helped reduce foreign currency liabilities of
the banking system, while the receipts from
On the assets side of the Central Bank’s
multilateral agencies as well as the retention
balance sheet, a contraction of reserve
money was recorded during 2023 entirely of foreign exchange within the banking system
due to the contraction in Net Domestic due to lower demand for foreign exchange
Assets (NDA) of the Central Bank surpassing augmented the foreign currency assets of the
the expansion of its Net Foreign Assets banking system. Accordingly, driven by these
(NFA) during the year. NDA of the Central developments, the year-on-year growth of broad
Bank declined by Rs. 797.2 billion during 2023 money (M2b) decelerated gradually to 7.3 per
mainly due to the decline in net claims on the cent by end 2023 and further to 6.4 per cent
Government, particularly the decline in the by end January 2024 from 15.4 per cent at
government securities holdings of the Central end 2022. On the liabilities side of M2b, the
Bank (net of repo). Nevertheless, this decline was increase in time and savings deposits held by
somewhat negated as retained earnings turned the public with LCBs contributed 77 per cent
negative from September 2023 as a result of to the year-on-year expansion of M2b during
accounting for the upfront day one loss incurred 2023. Meanwhile, an expansion of currency
following DDO, and reduction in the SDF and demand deposits held by the public with

32
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

LCBs was also recorded during 2023, partly Table

1.9 Current and Capital Account

1
due to increased holdings of currency and
USD million
demand deposits amidst increased cost of living Item
2022 (a) 2023 (b)
and declining interest rates which reduced Current Account (net) -1,448 1,559

the opportunity cost of holding currency and Receipts 20,228 23,780

Payments 21,677 22,221
demand deposits. Following the similar trend
Trade Balance -5,185 -4,900
observed in M2b, the growth of M4 broad money Exports 13,106 11,911
supply, as measured by the Financial Survey, Imports 18,291 16,811

remained moderate during 2023. Services (net) 2,110 3,404

Receipts 3,062 5,416
1.4 External Sector Of which;

Developments Transport 676 1,550

Travel 1,136 2,068

Sri Lanka’s external sector rebounded Computer Services 1,066 795

Construction Services 9 355
strongly in 2023 and demonstrated
Payments 953 2,012
greater stability, having recorded positive
Of which;
developments on many fronts towards the Transport 333 732
latter part of the year. The commencement Travel 244 152

of the IMF-EFF programme in March 2023 and Computer Services 133 198
Construction Services 11 111
its successful continuation thus far have been
Primary Income (net) -1,870 -2,564
instrumental in achieving stability in the external
Receipts 266 463
sector. The external current account recorded Compensation of employees 30 53

a surplus in 2023. This was supported by the Investment Income 237 410
Direct Investment 15 12
notable contraction in the trade deficit and Portfolio Investment - -
significant inflows in terms of services exports Other Investment 217 349
Payments 2,136 3,027
and workers’ remittances. The merchandise
Compensation of employees 69 30
trade deficit for 2023 recorded its lowest since Investment Income 2,068 2,997

2010, supported by a larger contraction in Direct Investment 549 888

Portfolio Investment 778 866
import expenditure than that of export earnings. Other Investment 741 1,243
The increase in services account surplus is Secondary Income (net) 3,496 5,619
mainly attributed to the notable improvement Receipts 3,793 5,989
Of which;
in earnings from tourism with the robust
Workers’ Remittances 3,789 5,970
recovery in tourist arrivals after facing repeated Payments 296 371

challenges over the past four years. The deficit Capital Account (net) 19 63

in the primary income account, compiled on an Receipts 38 94

Payments 19 31
accrual basis, widened in 2023 due to higher
Current and Capital Account (net) -1,429 1,622
interest payments on foreign loans, including
arrears. Further, workers’ remittances recorded As a Percentage of GDP
Trade Balance -6.7 -5.8
a notable improvement as a result of continuous Goods and Services -4.0 -1.8
departures for foreign employment and higher Current Account -1.9 1.8
(a) Revised Source: Central Bank of Sri Lanka
inflows through official channels. On the other (b) Provisional

hand, the financial account performance

33
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure
1.13 Highlights of the External Sector

1
Current Account Balance, Trade Balance, Earnings from Exports, Imports and Trade Balance
Tourism and Workers' Remittances
10 5 15
8 4
10
6 3
4 2 5
2 1
USD billion

USD billion

USD billion
0 0 0
-2 -1
-4 -5
-2
-6 -3
-10
-8 -4
-10 -5 -15
-12 -6
-20
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Current Account Balance Trade Balance -25
(RHS)
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Earnings from Tourism Workers' Remittances
Exports Imports Trade Balance

Gross Official Reserves and the Exchange Rate

6 400

350
5
300 A moderate level of trade deficit, rebounding
4
250 workers’ remittances, earnings from tourism
USD billion

and other net inflows to the services sector

Rs./USD

3 200

150 contributed to the current account surplus in

2
100 2023, resulting in a stable exchange rate
1
50 and increased gross official reserves.
0 0
Feb- 21
Apr- 21
Jun- 21
Aug- 21
Oct- 21
Dec- 21
Feb- 22
Apr- 22
Jun- 22
Aug- 22
Oct- 22
Dec- 22
Feb- 23
Apr- 23
Jun- 23
Aug- 23
Oct- 23
Dec- 23
Dec- 20

Gross Official Reserves End Exchange Rate (RHS)

Source: Central Bank of Sri Lanka

remained subdued with modest foreign direct 1.4.1 Balance of Payments

investment (FDI) inflows. However, foreign
investments in the government securities market Current and Capital Account
and the stock market recorded net inflows in
2023. Meanwhile, notable net forex purchases The external current account recorded a
by the Central Bank from the domestic forex surplus of US dollars 1,559 million in 2023,
market, disbursements under the IMF-EFF, and compared to a deficit of US dollars 1,448
foreign financing from multilateral agencies such million in 2022. This surplus was mainly driven
as the World Bank and the Asian Development by a lower trade deficit of US dollars 4.9 billion
Bank (ADB) helped augment GOR substantially in 2023, compared to a trade deficit of US
by end 2023. As opposed to the significant
dollars 5.2 billion recorded in 2022, improved
depreciation recorded in 2022, the Sri Lanka
trade in services, particularly earnings from
rupee appreciated notably during 2023 due
to improved liquidity conditions and market tourism, and a higher surplus in the secondary
sentiments in the domestic foreign exchange income account, despite a notable widening of
market. the primary income account deficit.

34
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.14 Current Account Balance and its Composition

1
2 Current Account Balance 3 8 Major Components of the Current Account
6
1 2
4
1 2

Percentage of GDP
0
0
USD billion

USD billion
-1 -2
-1
-4
-2
-2 -6

-8
-3 -3
-10

-4 -4 -12
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Current Account Balance Current Account Balance Trade Balance Primary Income (net) Secondary Income
as a % of GDP (RHS) (net)
Services (net) Current Account Balance
Source: Central Bank of Sri Lanka

Merchandise Trade Account exports, driven by garment exports. Meanwhile,

a significant drop in import expenditure was
The merchandise trade deficit for 2023
observed due to subdued economic activity,
reached its lowest level since 2010, largely
lower disposable income, import restrictions,
driven by a notable decline in import
and tight monetary and fiscal conditions.
expenditure relative to the decline observed
Accordingly, the deficit in the trade account
in export earnings. Export earnings dipped in
narrowed to US dollars 4,900 million compared
2023, with a sizeable contraction of industrial
to US dollars 5,185 million recorded in 2022.
As a percentage of GDP, the trade deficit
Table Summary of Merchandise Trade
narrowed to 5.8 per cent in 2023 from 6.7
1.10 Performance
per cent in 2022. Terms of trade, i.e., the ratio
2022 2023 Y-o-Y
Value Value Change
of the price of exports to the price of imports,
Category
(USD (USD deteriorated marginally, since both export and
%
million) million)
import unit value indices deteriorated close
Exports 13,106.4 11,910.7 -9.1
to similar levels in 2023, compared to 2022.
Industrial 10,465.3 9,277.7 -11.3

Agricultural 2,568.0 2,566.5 -0.1

Meanwhile, total trade, i.e., the total of export
Mineral 50.0 38.5 -23.1 earnings and import expenditure, declined
Unclassified 23.2 28.0 20.8 significantly by 8.5 per cent (year-on-year) in
Imports 18,291.0 16,811.1 -8.1 2023.
Consumer 2,813.0 3,043.9 8.2

Food and beverages 1,607.9 1,693.0 5.3 Export Performance

Non-food consumer 1,205.1 1,350.9 12.1

Intermediate 12,438.8 11,006.6 -11.5

The performance of merchandise exports
Investment 3,030.5 2,744.6 -9.4 was subdued in 2023. Earnings from exports
Unclassified 8.8 16.0 82.9 recorded US dollars 11,911 million in 2023,
Trade Balance -5,184.6 -4,900.4 which declined by 9.1 per cent compared to
Total Trade 31,397.4 28,721.8 -8.5
2022. This decline was influenced by global
Sources: Sri Lanka Customs
Petroleum Exporters and Importers factors, including high cost of living and
National Gem and Jewellery Authority
Central Bank of Sri Lanka economic downturn in major export destinations

35
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

and geopolitical tensions, which resulted in exports. The notable increase in earnings from

1
reduced demand for Sri Lankan exports. On the tea exports reflected higher export prices despite
other hand, domestic factors, such as higher a decline in export volumes. Mineral exports
operating expenses and supply constraints of recorded a decline compared to 2022, led by
intermediate goods adversely impacted the lower titanium ores exports in 2023.
overall competitiveness of exports. Further, as
Import Performance
a percentage of GDP, export earnings in 2023
declined to 14.1 per cent from 17.1 per cent in A notable contraction in import expenditure
2022. was observed in 2023. Expenditure on imports
The decline in industrial exports largely declined by 8.1 per cent to US dollars 16,811
contributed to the contraction in export million in 2023 compared to 2022, driven by
earnings, though the decline was broad- several factors, including restrictions on
based. The export of textiles and garments, the non-essential imports, subdued economic
single largest export of Sri Lanka, registered an activity, and constrained spending capabilities
18.0 per cent decline in 2023 compared to of the public due to tight monetary and fiscal
2022, thereby emerging as a key contributor to policies. As a percentage of GDP, import
the overall decline in exports. A notable decline expenditure declined to 19.9 per cent in 2023
was observed in petroleum product exports in compared to 23.8 per cent in 2022.
2023, attributed to the lower prices of bunker The decline in import expenditure was a
and aviation fuel. Earnings from most other result of lower intermediate and investment
industrial goods also experienced subdued goods imports, while expenditure on both
performance. However, gems, diamonds and food and non-food consumer goods imports
jewellery, transport equipment and machinery, increased. Expenditure on rice imports declined
and mechanical appliances exports recorded significantly due to lower volumes of rice
a growth in 2023. Meanwhile, agricultural imports in 2023 compared to 2022 although
exports reported a marginal dip in earnings in this decline was offset by higher expenditure
2023 compared to 2022. Of the agricultural on imports of most other food commodities,
exports, the increases in mainly tea, spices, and such as sugar, oils and fats, and milk powder.
unmanufactured tobacco were offset by weaker Meanwhile, expenditure on non-food consumer
performances in coconut, rubber, and seafood goods increased largely due to imports of

Figure Figure
1.15 Composition of Exports 1.16 Composition of Imports

Textiles and garments Fuel

Tea 16.4% 18.1% Textiles and textile articles
0.6%
21.5% Rubber products Machinery and equipment
Machinery and mechanical Chemical products
appliances
2023 Building material
Petroleum products
2023 USD 16.8 bn Medical and pharmaceuticals
USD 11.9 bn Food, beverages and tobacco 2022 2023
Plastics and articles thereof
Gems, diamonds and jewellery
Sugar and confectionery
Spices 2022 2023
Paper and paperboard and
65.5% articles thereof
77.9% Coconut Vegetables (a)
Seafood Wheat and maize
Chemical products Consumer Goods Cereals and milling industry
Industrial Goods products
Intermediate Goods Other
Minor agricultural products
Agricultural Goods Investment and Other Goods 0 2 4 6
Other
Mineral and Other USD billion
Goods 0 2 4 6 (a) Includes lentils, onions, potatoes, leguminous and
other vegetables.
USD billion
Sources: Sri Lanka Customs
Sources: Sri Lanka Customs Central Bank of Sri Lanka
Central Bank of Sri Lanka

36
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

medical and pharmaceutical products, and Table Summary of Terms of Trade

1.11 (2010=100)

1
mobile phones. In addition, most other items
categorised under non-food consumer goods Y-o-Y change 2022/ 2023 (%)
Category Value Volume Unit Value
showed an increasing trend during the latter Index Index Index

part of 2023 due to the relaxation of import Total Exports -9.1 2.4 -11.3

restrictions. Expenditure on intermediate Agricultural goods -0.1 -0.3 0.3

Industrial goods -11.3 3.0 -13.9

goods declined with textiles and textile articles
Mineral goods -23.1 -15.0 -9.5
accounting for a significant portion of the
Total Imports -8.1 3.0 -10.8
decline, in line with the reduction of apparel
Consumer goods 8.2 -1.4 9.7
exports. Expenditure on fuel imports, the largest Intermediate goods -11.5 0.7 -12.1
item in the import basket, declined primarily Investment goods -9.4 10.6 -18.1

due to lower import prices across all products: Terms of Trade -0.6

crude oil, refined petroleum (including LP gas), Source: Central Bank of Sri Lanka

and coal, though import volumes of crude

oil and coal recorded an increase. Reflecting the decline in the overall import price index.
lower economic activities, expenditure on most The volume indices for all main categories of
other intermediate goods declined in 2023. exports deteriorated, except industrial exports,
Expenditure on imports of investment goods whereas the import volume indices of all main
declined with notable reductions in all three categories, except for consumer goods, showed
main categories of investment goods, namely improvement during 2023.
machinery and equipment (mainly engineering
Direction of Trade
equipment), building material (mainly iron and
steel), and transport equipment, and most of Bilateral trade with most major trading
their subcategories, in 2023 compared to 2022, partners declined significantly, in line with
mainly attributable to import restriction and lower total trade in 2023. India continued
lower levels of economic activity, especially in to be the major trading partner of Sri Lanka,
the construction sector. followed by China and the USA. Accordingly,
these three key trading partners together
Terms of Trade
contributed to around 37 per cent of the total
The terms of trade, which is the ratio of trade of Sri Lanka in 2023. During the year,
export prices to import prices, deteriorated total trade with India was around US dollars
marginally in 2023. Export price and import 4 billion, while trade with both China and the
price indices declined by 11.3 per cent and USA exceeded US dollars 3 billion each. Total
10.8 per cent to 82.7 index points, and 96.6 trade with most countries declined in line with
index points, respectively, causing the terms of the decline in imports in general. The major
trade to deteriorate by 0.6 per cent in 2023 countrywise trade balances in 2023 remained
compared to 2022. The decline in the price almost unchanged, with notable trade surpluses
indices of industrial exports and mineral exports recorded with the USA, the UK, Italy, Germany,
contributed to the decline in export prices, while and the Netherlands, while significant trade
lower prices of the importation of intermediate deficits were recorded with China, India, the
goods and investment goods, accounted for UAE, Malaysia, and Singapore.

37
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure
Countrywise Trade Balances
Sri Lanka signed its fourth bilateral FTA
1.17

1
with Thailand, while negotiations of several
USA
other FTAs were fast tracked. Negotiations
UK on SLTFTA were resumed in January 2023 for
Italy
Germany
the 3rd round and the negotiations concluded
Netherlands at the 8th round held in November 2023. This
Singapore
Malaysia comprehensive FTA covers both trade in goods
Other Countries 2022 2023 and services, in addition to investments, customs
UAE
India procedures, intellectual property rights, etc.
China
-4 -3 -2 -1 0 1 2 3
Negotiations on the Economic and Technology
USD billion Cooperation Agreement with India (ETCA)
Source: Central Bank of Sri Lanka
resumed with the 12th round taking place during
External Trade Policies, October 2023 in Sri Lanka, and the 13th round
Developments, and Institutional in January 2024. ETCA has a broader scope
Support than the Indo-Sri Lanka Free Trade Agreement
(ISFTA) and these negotiations are expected to
Amidst subdued merchandise trade sector deepen the current trade of goods, technology
performance, the trade policy sphere moved cooperation, economic cooperation, liberalising
ahead with renewed momentum during services and investments. In line with lower
2023. Negotiations of Free Trade Agreements export earnings, exports under ISFTA, Pakistan-
(FTA), which were on hold since October 2018, Sri Lanka Free Trade Agreement (PSFTA) as
were fast tracked in 2023. As a result, FTA well as most other regional trade agreements
between Sri Lanka and Thailand (SLTFTA) was
Table Exports under Preferential and Free
signed in February 2024. Most of the import 1.12 Trade Agreements of Sri Lanka
restrictions imposed in 2020-2022 were eased
2022 2023 (a)
in 2023 with the improvement in liquidity Preferential Agreement
Value Value
Growth Share
(USD (USD
conditions in the domestic foreign exchange million) million)
(%) (%)
GSPs 4,314.7 3,803.5 -11.8 79.7
market. Accordingly, the 100 per cent cash
o/w EU (including GSP+) 2,440.3 2,094.5 -14.2 43.9
margin deposit requirement, imposed by the USA (b) 719.0 663.4 -7.7 13.9

Central Bank in May 2022, on the importation UK 659.0 562.4 -14.7 11.8
Russian Federation (c) 125.7 127.9 1.7 2.7
of selected non-essential items was removed in
Australia 97.0 93.3 -3.8 2.0
May 2023. Meanwhile, import restrictions to Canada 86.2 72.9 -15.4 1.5
temporarily suspend selected non-essential items Japan 80.7 68.3 -15.3 1.4
Turkey 45.3 62.6 38.1 1.3
were also gradually relaxed by the Government
Other GSP 61.6 58.2 -5.5 1.2
in June, July, and October 2023. Thereafter, ISFTA 561.5 536.4 -4.5 11.2
only motor vehicles remained on the suspended APTA (d) 228.4 213.9 -6.4 4.5
SAFTA 75.2 93.2 23.9 2.0
list. The restriction on payment terms that was
GSTP 62.5 79.1 26.7 1.7
imposed in May 2022 mainly on open account PSFTA 56.6 46.1 -18.6 1.0
terms continued throughout 2023, although SAPTA 1.5 1.1 -24.5 0.0

the requirement to obtain prior approval from Total 5,300.4 4,773.4 -9.9 100.0
As a Share Total Exports 40.4 40.1
commercial banks for Documents against (a)  Provisional Sources: Department of Commerce
Acceptance (DA) and Documents against (b) Shows GSP eligible exports since the US-GSP
expired on 31.12.2020
Sri Lanka Customs

Payment (DP) terms imports was removed in (c) Includes Russia, Belarus and Kazakhstan
(d) Earlier known as the Bangkok Agreement
February 2024. (1975)

38
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

declined in 2023. However, exports under the Institutional support was the cornerstone

1
Global System of Trade Preference (GSTP) of progress in trade policy initiatives during
increased, driven by cinnamon exports to 2023. In this regard, an International Trade
Mexico, and exports under the South Asian Free Office was established under the Presidential
Trade Area (SAFTA) increased due to pepper Secretariat to deal with all international trade
exports to India. Negotiations on a Preferential negotiations. The Office also spearheaded
Trade Agreement (PTA) with Bangladesh the combined efforts of several line agencies
completed 4 rounds, while negotiations on to conclude negotiations of the SLTFTA in
several other PTAs with Indonesia, Malaysia, an expeditious manner. The Department
and Vietnam are in the pipeline. In other trade of Commerce took necessary steps for the
related arrangements, the 14th US-Sri Lanka continuation of GSP schemes and other existing
Trade and Investment Framework Agreement FTAs, while supporting trade negotiation
(TIFA) Council Meeting was held in September processes. The Export Development Board
2023 in Colombo, while in October 2023, (EDB) launched the National Export Brand
Sri Lanka assumed the chairmanship of Indian “Your Vital Island - Sri Lanka” in November
Ocean Rim Association (IORA) for the period 2023 to position Sri Lanka as a recognised
2023 to 2025. sourcing destination to increase exports. The
Despite the subdued performance of implementation period of the National Export
garment exports, and other major export Strategy (NES) expired at end 2022 and a
items to the EU, the UK, and the USA, revitalisation of the NES project is currently in
Sri Lanka continued to benefit from the progress. Meanwhile, Sri Lanka Customs (SLC)
Generalised System of Preference (GSP) initiated its Strategic Plan for 2024-2028,
schemes offered by these key trading focusing on four strategic areas: revenue,
partners. The EU GSP scheme was set to expire trade facilitation, eco-social protection, and
on 31 December 2023 with a proposed new organisational development. To create a more
EU GSP+ 10-year scheme to be in effect from favourable environment for investment and
01 January 2024 until 31 December 2033, export promotion, the Cabinet of Ministers
which contains six additional International granted approval in November 2023 to
Conventions, that Sri Lanka has already ratified. establish the Sri Lanka Economic Commission
However, in September 2023, the European with the expectation to consolidate the Board
Commission extended the validity period of of Investment (BOI) and the EDB. Meanwhile,
the current EU GSP scheme until the end of to provide the overall policy direction, a new
2027. The new GSP Scheme of the UK named National Trade Policy is being drafted by the
“Developing Countries Trading Scheme” (DCTS) Ministry of Trade, Commerce and Food Security.
came into effect in June 2023, under which Such initiatives are key for the sustainable
Sri Lanka would benefit from its Enhanced development of the tradable sector of the
Preferences Scheme for 3 years. The US GSP economy.
scheme, which expired on 31 December
Services Account
2020 has not yet been reauthorised by the
US Government, although it is expected to be The surplus in the services account recorded
reauthorised on a retroactive basis as per the a notable increase in 2023. The surplus in
general practice of the US Government. Export the services account amounted to US dollars
performance under most other GSP schemes 3,404 million in 2023, compared to US dollars
remained weak during 2023. 2,110 million in 2022. The performance of the

39
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

services sector, including the travel, transport, and the Central Bank, particularly due to the

1
construction and telecommunications services new swap arrangement under which the swap
sectors improved significantly. Net inflows liabilities of RBI and payment arrears of the
to insurance and pension services and other ACU were combined. Meanwhile, the income
business services remained modest, while from reserve assets increased with the notable
inflows to the other sub sectors including increase in gross official reserves during 2023.
computer services contracted significantly.
Having commenced data collection under the Secondary Income Account
International Transactions Reporting System The surplus in the secondary income
(ITRS) in January 2023, the Central Bank account increased in 2023 with continuous
initiated publishing monthly services sector data improvement in workers’ remittance inflows
based on ITRS for the first time in January 2024. since the second half of 2022. Increased
Notably, under the newly established ITRS, there workers’ remittances were supported by the
has been a significant refinement of already continued departures for foreign employment
existing data series such as computer services,
abroad. Increased inflows through official
air transport, sea transport, and construction
channels, supported by the correction in the
services. Tourism continued to recover in 2023
large disparity that prevailed between the
recording 1,487,303 arrivals, which is more
official exchange rate and informal rates, also
than double the arrivals recorded in 2022.
supported the improved levels of remittances.
Accordingly, earnings from tourism increased to
Hence, workers’ remittances increased notably
US dollars 2,068 million in 2023 compared to
by 57.5 per cent to US dollars 5,970 million in
US dollars 1,136 million in 2022.
2023, compared to US dollars 3,789 million
Primary Income Account in 2022. Consequently, the secondary income
account recorded a surplus of US dollars 5,619
Deficit in the primary income account
million in 2023, compared to US dollars 3,496
widened in 2023. All interest payments,
million in 2022.
including arrears accrued as a result of the
debt standstill, and interest payments made by Capital Account Balance
the Central Bank on account of outstanding
Net inflows to the capital account increased
liability of Asian Clearing Union (ACU) and
international currency swap arrangements in 2023. Capital transfers to both the
with the Bangladesh Bank and Reserve Bank Government and private sector increased in
of India (RBI) mainly contributed to outflows in 2023, with capital grants to the Government
the primary income account. Accordingly, the remaining modest. Accordingly, the capital
primary income account deficit amounted to account recorded a surplus of US dollars 63
US dollars 2,564 million in 2023 compared million in 2023, compared to a surplus of
to US dollars 1,870 million in 2022. Despite US dollars 19 million in 2022.
an increase in the dividends paid out by direct Financial Account
investment enterprises (DIEs) during the year, an
increase was observed in reinvested earnings In the financial account of the Balance of
in 2023 compared to 2022. However, interest Payments (BOP), both the net incurrence
payments on account of debt securities remained of liabilities and net acquisition of financial
at similar levels. Nevertheless, there was a assets recorded notable increases during
notable increase in interest payments on foreign 2023. Net incurrence of liabilities recorded an
loans, including arrears of the Government increase of US dollars 2,171 million in 2023

40
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure Table
1.18 Financial Account 1.13
Financial Account

2
Item

Financial Account (net)

Net Acquisition of Financial Assets
2022 (a)
USD million

-1,569
84
2023 (b)
1,304
3,474
1
USD billion

0 Net Incurrence of Liabilities 1,652 2,171

Direct Investment: Assets 15 34
-2 Equity 11 29
Debt Instruments 5 5
Direct Investment: Liabilities 884 712
-4
Equity 275 496
Debt Instruments 610 216
-6 Portfolio Investment: Assets - 173
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Debt Securities - 173
Assets Liabilities Financial Account (net) Portfolio Investment: Liabilities 370 931
Equity 151 8
Source: Central Bank of Sri Lanka
Debt Securities 218 923
General Government 212 910
compared to US dollars 1,652 million in 2022. Short Term (Treasury Bills) 30 132
Long Term 183 778
Main inflows to the financial account during Treasury Bonds 21 78
Sri Lanka Development Bonds 2 -27
2023 included the receipt of the proceeds of Sovereign Bonds 159 727
Other Sectors 6 12
the IMF-EFF arrangement amounting to around Long-term 6 12
Financial Derivatives - -
US dollars 670 million and the receipts from the Other Investment: Assets 1,302 1,022
Currency and Deposits 514 114
World Bank and ADB amounting to around US Trade Credit and Advances 282 186
dollars 500 million and US dollars 550 million, Other Accounts Receivable
Other Investment: Liabilities
506
398
721
528
respectively. Currency and Deposits -583 -143
Loans 385 1,056
Trade Credit and Advances -895 -555
Direct Investments Other Accounts Payable 1,492 171
Special Drawing Rights (SDRs) - -
Reserve Assets -1,234 2,245
FDI inflows, including foreign loans to Net Errors and Omissions -139 -318
Overall Balance (c) -2,806 2,826
DIEs, remained modest during the year. (a) Revised Source: Central Bank of Sri Lanka
(b) Provisional
Although equity investments and reinvestment (c) Refer Table 1.15 for the derivation of overall balance

of earnings recorded an increase in 2023,

related party loans to DIEs recorded a notable
Portfolio Investment
decline. Meanwhile, foreign loan inflows to BOI Portfolio investment, in the form of equity
companies moderated in 2023. Accordingly, and investment fund shares in CSE,
FDI, including foreign loans, amounted to remained modest, while foreign investment
US dollars 758 million in 2023, compared to in government securities increased notably
US dollars 1,167 million in 2022. Further, FDI, during 2023. The notable increase in foreign
excluding loans, amounted to US dollars 712 investment in government securities was primarily
million in 2023, compared to US dollars 884 due to the accrued interest on International
million in 2022. On a sectoral basis, FDI inflows Sovereign Bonds (ISBs), the repayment of which
to BOI registered companies were mainly to was suspended temporarily since early 2022.
logistics services, telecommunications, hotels Non resident investments in the government
and manufacturing sectors, while FDI inflows securities market, particularly in Treasury bills
to companies listed in the Colombo Stock increased substantially in 2023. Arrears due to
Exchange (CSE), but not registered with BOI, non-payment of coupon payments and interest
were mainly to the telecommunications and, on foreign loans were added to the outstanding
fuel, gas, and petroleum sectors. liability of the relevant instrument. Accordingly,

41
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

US dollars 727 million of coupon payments of 1.4.2 International Investment

1
ISBs were recorded as accrued interest of ISBs. Position, Reserve Assets,
Further, during 2023, US dollars 12 million was and Overall Balance
recorded as accrued interest on international
International Investment Position
bonds to non-residents, which were issued by (IIP)
SOBEs.
Sri Lanka’s net international investment
Other Investment and Reserve position deteriorated in 2023. There was
Assets a notable increase in both the total external
liability position and total external asset position
Meanwhile, trade credits and advances
of the country by end 2023 compared to end
recorded a decline in liabilities as CPC
2022. However, the increase in the total liability
continued to repay its trade credit liabilities position exceeded the increase in the total asset
throughout the year, while being unable position by end of 2023, compared to end
to secure new trade credit facilities during 2022.
the year. The banking industry's exposure to
In terms of the outstanding external liability
foreign loans decreased during 2023 as a result position of the country, the Central Bank
of obtaining fewer new foreign borrowings entered into a special swap arrangement
while paying off previous borrowings, especially with RBI to issue a new debt instrument,
in light of the banking system's higher foreign replacing the outstanding RBI international
exchange liquidity in 2023. In the meantime, swap arrangement and the outstanding
borrowings by the corporate sector continued liability of ACU. This instrument was reflected in
to be constrained, resulting in insignificant net outstanding currency and deposits of the Central
inflows into the sector during the year. Bank and replaced ACU outstanding amount
Net acquisition of financial assets recorded classified under other accounts payable as at
a notable increase during 2023 amounting end 2023. The outstanding liability position
to US dollars 3,474 million, compared to as direct investments increased only modestly
a marginal net increase of US dollars 84 during the year, as FDI inflows remained low
million in 2022. This was mainly due to the and market prices of publicly listed companies
increase in GOR by US dollars 2,245 million remained subdued. The increase in liability
in 2023 compared to the decline of GOR by position of the debt securities was a result of the
US dollars 1,234 million in 2022. The increase increased market prices19 and accrued coupon
in GOR was mainly due to the substantial net payments of ISBs. The increase in foreign loans
purchases of forex from the domestic market was due to the receipt of IMF, World Bank and
by the Central Bank and the receipts from IMF, ADB funding by the Government as well as the
World Bank, and ADB. However, net acquisition increase in accrued interest of unpaid foreign
of assets in terms of currency and deposits, loans by the Government. Consequently, the
trade credits and advances and other accounts country’s total external liability position increased
receivable increased in the banking sector in 19 The market prices of ISBs are based on market prices available in international
trading platforms and may not necessarily be attributed to secondary market trades
2023. in international markets during the year.

42
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

from US dollars 58.1 billion as at end 2022 to Figure

1.19 International Investment Position

1
US dollars 64.0 billion as at end 2023.
20
The country’s external asset position 10
0

USD billion
improved during 2023. The external asset -10

position in the form of reserve assets and -20

-30
banking sector external assets increased during -40

the year. The reserve asset position of the -50

-60
Central Bank more than doubled during the -70
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
year. Further, the external asset position of the Total Assets Total Liabilities Net International Investment Position

banking sector also increased due to increases Source: Central Bank of Sri Lanka

in banks’ currency and deposits and other

accounts receivable. Accordingly, the country’s the total liability position was higher than the
total asset position increased from US dollars increase in the total asset position, the country’s
8.8 billion as at end 2022 to US dollars 12.5 net liability position as reflected by the IIP
billion as at end 2023. As the increase in increased to US dollars 51.4 billion as at end
2023 from US dollars 49.3 billion as at end
Table International Investment Position 2022.
1.14 (Summary) (a)
USD million
(End period position)
Reserve Asset Position
2022 (b) 2023 (c)
Item
Assets Liabilities Assets Liabilities
GOR20 improved and reached a healthy
Direct Investment 1,534 14,047 1,560 14,831 level of US dollars 4,392 million as at
Equity and Investment Fund Shares 1,489 8,103 1,511 8,671
end 2023, compared to US dollars 1,898
Debt Instruments 45 5,944 50 6,160
million as at end 2022, reflecting favourable
Portfolio Investment 0.1 4,366 174 7,744 developments in the external sector observed
Equity and Investment Fund Shares 332 484
during 2023. The buildup of GOR was mainly
Debt Securities 0.1 4,035 174 7,260
due to the absorption of foreign exchange by the
Other Investment 5,399 39,689 6,420 41,412 Central Bank from the domestic foreign exchange
Currency and Deposits 1,656 5,880 1,770 7,941
market and the receipt of other foreign exchange
Loans 29,497 31,721
Trade Credit and Advances 1,493 1,020 1,679 464 inflows, such as the first and second tranches of
Other Accounts Receivable /
Payable
2,250 2,028 2,971 - the ongoing IMF-EFF arrangement and financing
Special Drawing Rights (SDRs) 1,265 1,285
support from the World Bank and the ADB.
Reserve Assets 1,898 4,392
The Central Bank’s intervention in the domestic
foreign exchange market by way of
Total Assets / Liabilities
Net International Investment
8,830 58,102 12,546 63,986
absorbing foreign exchange amounted to
-49,272 -51,440
Position
US dollars 1,683 million on a net basis (based
Memorandum Items
IIP- Maturity-wise Breakdown 8,830 58,102 12,546 63,986
on value date) during the year, while net foreign
Short Term 7,091 7,957 9,330 5,516 exchange swap arrangements with domestic
Long Term 1,739 50,145 3,216 58,471
banks amounted to around US dollars 861
Source: Central Bank of Sri Lanka
(a) Refer Appendix Table 12 for a detailed breakdown of the IIP
20 These levels of GOR at the end of 2022 and 2023 also included the international
(b) Revised swap facility of Chinese Yuan 10 billion from the People's Bank of China (PBOC)
(c) Provisional which was valued at US dollars 1,433 million and US dollars 1,420 million,
respectively.

43
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

million (based on value date). The buildup Figure Major Components of Reserve
1.20 Asset Position

1
of GOR through direct absorption of foreign
2022 2023
exchange from the domestic foreign exchange Reserve Asset Position: USD 4.4 bn
Reserve Asset Position: USD 1.9 bn
market enabled the Central Bank to overperform
on the net international reserve targets under
the IMF-EFF arrangement. Net foreign asset
position of the banking sector stood at a positive
level as a result of recording a higher foreign
assets position than foreign liabilities position.
The foreign asset position of the banking sector Securities Currency & Deposits Monetary gold
Reserve position in the IMF + Special Drawing Rights
increased to US dollars 4,981 million by end Source: Central Bank of Sri Lanka

2023 from US dollars 3,976 million as at end

2022. Consequently, total international reserves, Consequently, there was an improvement in the
which comprise both GOR and foreign assets of net international reserve position by end 2023
the banking sector, increased significantly by end compared to the previous year, resulting in the
2023. overall balance recording a surplus of around
US dollars 2,826 million in 2023, compared to
Overall Balance
a deficit of US dollars 2,806 million in 2022.
The overall balance of the BOP, which
1.4.3 External Debt and Debt
represents the change in net international
Service Payments
reserves, recorded a significantly higher
surplus by end 2023, after recording External Debt
higher deficits in previous years since
2020. GOR increased significantly mainly Sri Lanka’s external debt expressed in terms
due to the significant net absorption of foreign of market value,21 increased in 2023. There
exchange by the Central Bank from the was a notable increase in the external debt of
domestic foreign exchange market and receiving 21 Since 2012, external debt statistics for official publication purposes are calculated
in terms of market value in line with international standards on BOP compilation as
significant inflows from multilateral institutions. per the 6th edition of the Balance of Payments and International Investment Position
Manual (BPM6).

Table
1.15 Gross Official Reserves, Total Foreign Assets and Overall Balance
USD million
(End period position)

Item 2019 2020 2021 2022 2023 (a)

1. Government Foreign Assets 386 155 177 39 875

2. Central Bank Foreign Assets 7,256 5,510 2,962 1,858 3,517
3. Gross Official Reserves (1+2) 7,642 5,664 3,139 1,898 4,392
4. Foreign Assets of Deposit-taking Corporations 2,760 2,856 2,983 3,976 4,981
5. Total Foreign Assets (3+4) (b) 10,402 8,521 6,122 5,874 9,373
6. Reserve Related Liabilities (c) 1,771 2,121 3,562 5,127 4,796
7. Net International Reserves (NIR) (3-6) 5,871 3,543 -423 -3,229 -404
8. Overall Balance (d) 377 -2,328 -3,967 -2,806 2,826
9. Gross Official Reserves in Months of Imports of Goods 4.6 4.2 1.8 1.2 3.1
10. Total Foreign Assets in Months of Import of Goods 6.3 6.4 3.6 3.9 6.7

(a) Provisional Source: Central Bank of Sri Lanka

(b) Excludes foreign assets in the form of ‘Direct investment abroad’ and ‘Trade credit and advances granted’
(c) The total outstanding debt of the Central Bank, excluding outstanding Special Drawing Rights (SDRs)
(d) Change in NIR position during the period

44
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.21 Outstanding External Debt

1
External Debt Position (Market Value) 65
60
External Debt
50 60

40 55

USD billion
USD billion

30 50

20 45

10 40

0 35
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Q4-2012
Q2-2013
Q4-2013
Q2-2014
Q4-2014
Q2-2015
Q4-2015
Q2-2016
Q4-2016
Q2-2017
Q4-2017
Q2-2018
Q4-2018
Q2-2019
Q4-2019
Q2-2020
Q4-2020
Q2-2021
Q4-2021
Q2-2022
Q4-2022
Q2-2023
Q4-2023
General Government Central Bank

Deposit-Taking Corporations Other Sectors

Direct Investment: Intercompany Lending Market Value Face Value

Government External Debt (Face Value)

40 50
48
35
46
“Sri Lanka’s external debt, based on market
30 44

25
42 value terms, amounted to USD 54.8 bn as at
USD billion

40
per cent

20 38 end 2023, which is significantly lower than the

36
15 external debt at face value of USD 60.2 bn.
34
10 32 The reduction in market value of external debt
30
5
28 is due to the significantly lower market
0 26 valuation of ISBs issued by the Government”
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
T bills + T bonds+ SLDS ISBs
Foreign Loans
Government External Debt as a % of GDP (RHS)
Source: Central Bank of Sri Lanka

the Government in 2023 compared to 2022 in accrued interest of bilateral foreign loans
mainly due to an increase in market value of of the Government, and a modest increase
ISBs issued by the Government compared to the in foreign investments in Treasury bills and
significantly lower market values that prevailed Treasury bonds contributed to the increase in
in 2022. Further, the external debt of the outstanding external debt of the Government.
private sector and SOBEs and DIEs recorded a Consequently, the outstanding external debt
moderate increase. Meanwhile, external debt of the Government, expressed in market value
of the Central Bank and the banking sector for tradable debt instruments, amounted to US
recorded a decline. dollars 33.1 billion as at end 2023, compared
to US dollars 27.5 billion as at end 2022. In
The external debt of the Government
terms of face value, the external debt of the
recorded a marked increase in 2023. The
Government was around US dollars 38.4 billion
increase in the market value of ISBs issued by
as at end 2023.
the Government, increase in accrued coupons
of outstanding ISBs, increase in outstanding The outstanding external debt of the Central
foreign loans of the Government associated with Bank decreased modestly with the gradual
the receipts from multilateral partners, increase repayment of the IMF-EFF obtained in 2016

45
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table
Outstanding External Debt Position and the commencement of repayment of
1.16

1
the special swap arrangement with RBI.
USD million
(End period position) Meanwhile, the outstanding external debt of
2022 2023
Item
(a) (b) the banking sector decreased with a significant
General Government 27,518 33,117
decline in outstanding short term and long term
Treasury Bills (based on book value) 31 210
Treasury Bonds (based on book value) 34 124 loans. Although there was a notable reduction
Sri Lanka Development Bonds (based on face value) 27 - in the outstanding trade credits of the private
International Sovereign Bonds (based on market price
3,866 6,794
including accrued interest) sector, the outstanding foreign loans of the
Outstanding Foreign Loans (including accrued interest) 23,562 25,988
Central Bank 6,391 6,081 private sector increased and the outstanding
Currency and Deposits (short term) 0.2 0.3 foreign loans of SOBEs remained at similar
Asian Clearing Union (ACU) Liabilities 2,028 -
Special Drawing Rights (SDRs) Allocation 1,265 1,285 levels. Outstanding foreign loans with related
RBI Swap Arrangement 400 - parties by DIEs also increased during 2023.
RBI and ACU Combined Swap Arrangement (RBI Special
2,451
Swap)
Bangladesh Bank Swap Arrangement 200 - The country’s external debt position as a
PBOC Swap Arrangement 1,434 1,420 percentage of GDP remained at similar
Accrued Interest Applicable to Swap Arrangements 3 20
Credit and Loans with the IMF 1,062 904 levels as at end 2022 and 2023. The external
Deposit-taking Corporations 5,370 4,933 debt position as a percentage of GDP was 65.0
Currency and Deposits (c) 3,843 4,050
Loans - short term 704 307
per cent as at end 2023, compared to 64.6 per
Loans - long term 823 576 cent as at end 2022. Further, the proportion
Other Sectors (d) 4,443 4,542
of loans that are short term in nature recorded
Trade Credit and Advances (e) 1,020 464
Debt Securities (based on market price and including
78 132 a reduction during the year. Moreover, as the
accrued interest)
Loans by Private Sector Corporations 2,361 2,966 government debt standstill continued, there was
Loans by State Owned Business Enterprises and Public
Corporations
985 980
no change in the face value of outstanding ISBs
Direct Investment: Intercompany Lending (f) 5,944 6,160
Gross External Debt Position 49,667 54,832
to non-residents during the year.
As a Percentage of GDP
Gross External Debt 64.6 65.0 Foreign Debt Service Payments
Short Term Debt 9.9 6.0
Long Term Debt 54.7 59.0 Sri Lanka’s external debt service payments
As a Percentage of Gross External Debt
remained modest in both 2022 and 2023
Short Term Debt 15.4 9.2
Long Term Debt 84.6 90.8 since the announcement of the debt
Memorandum Items
standstill on selected government debt in
Non-Resident Holdings of Debt Securities - Sectorwise 11,622 12,615
Breakdown at Face Value April 2022. The country’s external debt service
General Government 11,447 12,440 payments, which averaged close to US dollars
Treasury Bills 34 233
Treasury Bonds 36 130
5.0 billion per year in 2019, 2020, and 2021
Sri Lanka Development Bonds 27 - reduced to US dollars 2.5 billion in 2022 and
International Sovereign Bonds 10,800 10,800
US dollars 2.6 billion in 2023. External debt
Accrued Interest of ISB Coupons due to Non-Residents 551 1,278
Other Sectors 175 175 service payments in 2023 were marginally
Face Value of Total Outstanding ISBs 12,550 12,550 higher than 2022 due to increased external
Outstanding ISBs held by Non-Residents 10,800 10,800
Outstanding ISBs held by Residents 1,750 1,750
debt servicing of the Central Bank. Government
(a) Revised
Source: Central Bank of Sri Lanka external debt servicing was significantly lower
(b) Provisional
(c) Includes deposits of personal foreign currency account holders
in 2023 as there were no repayments of ISBs
(d) Includes private sector and State Owned Business Enterprises
(e) Includes trade credits outstanding of the Ceylon Petroleum Corporation and
in 2023 due to the debt standstill. However,
private sector companies
(f) Includes inter-company borrowings and shareholder advances of BOI
external debt servicing of foreign loans of the
registered companies Government increased as capital and interest

46
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Table 44.8 per cent against the US dollar in 2022,

1.17 External Debt Service Payments

1
appreciated by 12.1 per cent in 2023. During
USD million
the first two months of 2023, the Sri Lanka
Item 2022 (a) 2023 (b)
1. Debt Service Payments 2,483 2,589
rupee remained stable at around Rs. 362 per
1.1 Amortisation 1,714 1,869 US dollar as the Central Bank continued to
General Government 1,236 1,043
Project Loans 845 1,041 provide daily guidance on the spot exchange
Debt Securities 391 2
Central Bank 140 522 rate by publishing a middle spot exchange
IMF 140 172
International Swaps - 350 rate and a variation margin, which helped
Private Sector and Deposit-taking Corporations
Foreign Loans
339
339
304
304
stabilise the exchange rate from significant
1.2 Interest Payments 769 720 intraday volatility. The Sri Lanka rupee
General Government 465 405
Project Loans 273 377 appreciated notably thereafter, helped by the
Debt Securities 192 28
Central Bank 57 118 policy measures taken by the Central Bank to
IMF
International Swaps
20
36
57
60
enhance forex liquidity in the market and to
Private sector and Deposit-taking Corporations 216 185 provide greater flexibility in the determination
Foreign Loans 204 173
Debt Securities 12 12 of exchange rate. From 27 February 2023, the
Intercompany Debt of Direct Investment Enterprises 31 12
2. Earnings from Export of Goods and Services 16,169 17,327 Central Bank commenced gradually relaxing
3. Receipts from Export of Goods, Services, Income
and Current Transfers
20,228 23,779 the requirement imposed on licensed banks
4. Debt Service Ratio
4.1 As a Percentage of 2 above on mandatory sales of foreign exchange to
Overall Ratio
Excluding IMF Transactions
15.4
14.4
14.9
13.6
the Central Bank out of the converted export
4.2 As a Percentage of 3 above proceeds and workers’ remittances and later
Overall Ratio 12.3 10.9
Excluding IMF Transactions 11.5 9.9 revoked the said requirement with effect from
5. Government Debt Service Payments
5.1 Government Debt Service Payments (c) 1,701 1,448 07 March 2023 with a view to enhancing forex
5.2 As a Percentage of 1 Above 68.5 55.9
Source: Central Bank of Sri Lanka
liquidity in the banking system. Further, the
(a) Revised
(b) Provisional
Central Bank discontinued the provision of daily
(c) Excludes transactions with the IMF guidance on exchange rates with effect from 07
March 2023, in order to allow greater flexibility
payments of the multilateral institutions were
in the determination of the exchange rate and
repaid during 2023. The Central Bank repaid
encourage market driven activity in the domestic
an international swap facility of US dollars
forex market in line with the flexible inflation
200 million owed to the Bangladesh Bank
targeting framework of the Central Bank.
and started repaying outstanding liabilities on
Subsequently, liquidity in the domestic forex
account of the special swap arrangement with
market improved and spot market activity picked
the RBI. Further, the Central Bank continued to
up. Favourable market sentiments subsequent to
repay IMF-EFF liabilities initiated in 2016. Debt
the commencement of the IMF-EFF arrangement
service payments of private sector corporations
in March 2023 also helped the exchange rate to
in 2023 remained around similar levels to that
appreciate.
of 2022.
A notable appreciation of the Sri Lanka
1.4.4 Exchange Rate Movements
rupee was registered during the second
The Sri Lanka rupee appreciated sharply quarter, particularly in May and early
in 2023 under a market based exchange June 2023 due to several favourable
rate policy implemented by the Central developments. Improved market liquidity
Bank despite some intermittent volatility. as a result of increased forex inflows in the
The Sri Lanka rupee, which depreciated by form of export proceeds, workers’ remittances

47
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table
1.18 Exchange Rate Movements

1 Euro
Currency

Indian rupee
2021
226.86
2.69
In Rupees per unit of Foreign Currency
End Year Rate
2022
386.93
4.39
2023
358.75
3.90
2021
Annual Average Rate

235.10
2.69
2022
339.04
4.11
2023
354.11
3.97
Percentage Change over Previous Year (a)

2022
End Year

-41.37
-38.59
2023
7.86
12.57
Annual Average
2022
-30.66
-34.57
2023
-4.26
3.63
Japanese yen 1.74 2.74 2.29 1.81 2.44 2.34 -36.41 19.53 -25.92 4.54
Pound sterling 270.60 437.35 412.61 273.51 396.89 407.07 -38.13 5.99 -31.09 -2.50
US dollar 200.43 363.11 323.92 198.88 324.55 327.53 -44.80 12.10(b) -38.72 -0.91(b)
Special Drawing Rights (SDRs) 280.53 483.24 434.60 283.18 431.91 436.88 -41.95 11.19 -34.43 -1.14
Source: Central Bank of Sri Lanka
(a) Changes computed on the basis of foreign currency equivalent of Sri Lanka rupees. The sign (-) indicates depreciation of the Sri Lanka rupee against each currency.
(b) For analytical purposes, the appreciation/depreciation of the Sri Lanka rupee is calculated by the Central Bank based on the year end exchange rate. Accordingly,
the Sri Lanka rupee recorded an appreciation in terms of end 2023 exchange rate compared to that of end 2022. However, the Sri Lanka rupee recorded a marginal
depreciation in 2023 based on the annual average exchange rate compared to 2022.

and foreign investments to the government impact. In the latter part of the year, improved
securities market along with subdued demand workers’ remittances and services sector inflows
for imports, reflecting tight monetary conditions, were observed. Market sentiments continued
were the major factors that contributed to this to improve, mainly as a result of receiving the
appreciation. Further, the receipts of the special second tranche of the IMF-EFF arrangement and
policy based loan for budget support from ADB receipts from ADB and the World Bank, towards
in May 2023 and the World Bank financing in the latter part of the year. Accordingly, the rupee
June 2023 were conducive to the improvement recorded an appreciation in the latter part of
in market sentiments. Overall, the Sri Lanka the year despite some intermittent volatility.
rupee recorded the highest appreciation of Meanwhile, the intervention of the Central
24.8 per cent against the US dollar since Bank in the domestic foreign exchange market
the beginning of the year by 08 June 2023. resulted in an absorption of US dollars 1,896
Thereafter, the Sri Lanka rupee showed some million, on a net basis (based on trade date),
volatility and recorded a depreciation during the in 2023. This included an absorption of US
third quarter of 2023, reflecting relatively tight dollars 2,722 million and a supply of US dollars
liquidity conditions that prevailed in the domestic 826 million. In contrast, in 2022, the Central
foreign exchange market. The main factor that Bank supplied foreign exchange amounting to
contributed to the depreciation pressure was the
drain in liquidity due to increased demand from Figure CBSL Intervention and
1.22 Annual Average Exchange Rate
banks to cover their foreign currency position
2 350
associated with rupee settlement of the Sri Lanka
1
Development Bonds (SLDBs). Consequently, the 300

Central Bank intervened by providing liquidity 0

250
USD billion

Rs. / USD

support to the affected bank and to the market -1

from time to time during the third quarter of -2

200

2023. However, pressure on the exchange rate 150

-3
that was expected to have arisen out of the pent
100
up demand for imports at the commencement -4
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
of the gradual relaxation of import controls Net Absorption (+) / Supply (-)
Average Exchange Rate (RHS)
from June 2023 onwards did not have a major Source: Central Bank of Sri Lanka

48
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure Exchange Rate Appreciation / Japanese yen (19.5 per cent) and the Indian
1.23 Depreciation

1
rupee (12.6 per cent) during 2023. With the
15
10 combined effect of the appreciation of the rupee
5
0
against major currencies, the Sri Lanka rupee
-5 also appreciated against the Special Drawing
-10
Per cent

-15 Rights (SDR) by 11.2 per cent during the year.

-20
-25 Nominal and Real Effective
-30
-35 Exchange Rates
-40
-45
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
During 2023, the Nominal Effective
Appreciation(+) / Depreciation(-) Exchange Rate (NEER) indices increased
Source: Central Bank of Sri Lanka while the Real Effective Exchange Rate
US dollars 2,726 million to the market while (REER) indices decreased. The 5-currency
purchasing US dollars 2,147 million. NEER index increased by 10.52 per cent while
the 24-currency NEER index increased by 13.39
The appreciation trend of the Sri Lanka
per cent. The increase in NEER indices reflects
rupee continued in 2024 as well.
the nominal appreciation of the Sri Lanka rupee
Accordingly, the Sri Lanka rupee appreciated
against the selected major currencies together
by 7.6 per cent against the US dollar as of end
with the movements in cross currency exchange
March 2024. This appreciation was mainly
rates. Further, 5-currency REER index decreased
due to robust inflows in the form of earnings
by 12.87 per cent and the 24-currency REER
from tourism, workers’ remittances, and
index decreased by 12.42 per cent. Overall,
reduced import expenditure. Consequently, the
both REER indices remained significantly below
Central Bank has also been able to purchase
the level that prevailed in the base year 2017,
a significant amount of foreign exchange of
indicating the continued competitiveness of the
around US dollars 1,200 million on net basis
Sri Lanka rupee.
(based on the trade date) during the first
quarter of 2024 which helped prevent excessive Figure Effective Exchange Rate Indices
appreciation pressure that prevailed in the 1.24 24-Currency (2017=100)
120
market.
110

Reflecting movements in cross-currency 100

exchange rates against the US dollar 90

Index Points

in international markets, the rupee 80

appreciated markedly against all other 70

major currencies in 2023, in comparison 60

to the previous year. Accordingly, the Sri 50

40
Lanka rupee appreciated against the euro (7.9
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-15
Dec-15
May-16
Oct-16
Mar-17
Aug-17
Jan-18
Jun-18
Nov-18
Apr-19
Sep-19
Feb-20
Jul-20
Dec-20
May-21
Oct-21
Mar-22
Aug-22
Jan-23
Jun-23
Nov-23

per cent), the pound sterling (6.0 per cent), the

NEER 24 REER 24
Source: Central Bank of Sri Lanka

49
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table
Nominal and Real Effective Exchange Rates
1.19

1 Effective Exchange
Rate Indices (a) (b)
(2017=100)

NEER - 24 currencies
2021
79.65
End Year Index

2022
47.32
2023
53.66
Annual Average Index

2021
78.64
2022
53.99
2023
53.30
Percentage Change over Previous Year

End Year Index

2022
-40.59
2023
13.39
Annual Average Index

2022
-31.34
2023
-1.28
REER - 24 currencies 90.51 79.74 69.84 84.76 77.49 71.39 -11.90 -12.42 -8.58 -7.87
Source: Central Bank of Sri Lanka
(a) The Nominal Effective Exchange Rate (NEER) is a weighted average of nominal exchange rates of 24 trading partner and competitor countries. Weights are based on the trade shares
reflecting the relative importance of each currency in each of the currency baskets. The Real Effective Exchange Rate (REER) is computed by adjusting the NEER for inflation differentials
with respect to each currency in the basket. A minus sign indicates depreciation. CCPI was used for REER computation.
(b) The exchange rate has been defined in terms of indices so that the appreciation/depreciation of the rupee relative to other currencies is directly reflected by a rise/fall in the values of
the effective exchange rate indices, respectively.

1.5 Financial Sector The domestic equity market recorded mixed

Developments performance in terms of price indices, market
capitalisation and daily turnover while foreign
During 2023, overall financial sector participation declined in 2023, compared to
stability was maintained amidst challenging 2022. The Central Bank continued to engage
conditions particularly emanating from in activities relating to financial inclusion and
the economic crisis. The banking sector in ensuring the provisioning of robust financial
which dominates the financial sector was infrastructure for the smooth functioning of
able to maintain stability by preserving capital the financial sector. Further, new regulations
supported by the decline in risk weighted on Financial Consumer Protection aimed at
assets while liquidity was maintained above the fortifying the financial consumer protection
regulatory minimum with increased investments framework for Financial Service Providers under
in government securities. Moreover, total assets the regulatory purview of the Central Bank
of the banking sector improved along with were issued during 2023. Further details about
profitability while default risk as indicated by the conditions of the financial system could be
obtained from the Financial Stability Review
the Stage 3 loans ratio increased during 2023
2023.22
compared to 2022. Similarly, the asset base
of the LFCs sector also improved while the 1.5.1 Banking Sector
default risk of the sector recorded an increase The banking sector, which dominates
in terms of the Stage 3 loans ratio in 2023. the financial sector, accounting for 61.5
Accordingly, elevated credit risk as reflected by per cent of total assets as at end 2023,
the Stage 3 loans ratio remained a concern for managed to withstand challenges that
both the banking and LFCs sectors. Meanwhile, emanated from the economic crisis and
the insurance sector, which includes long adverse global conditions, with the support
term and general sub-sectors, showed varying of preserving capital and liquidity above
financial performance during the year. Within the regulatory minimum. By end 2023, the
financial markets, liquidity shortage in the banking sector comprised 30 banks, i.e., 24
domestic money market declined considerably LCBs including 11 branches of foreign banks,
by the end of the year while liquidity conditions and 6 LSBs. The banking sector continued to
in the domestic foreign exchange market support financial intermediation by expanding
also improved. Moreover, the yields of the the banking network and enhancing banking
government securities market witnessed a
22 https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/financial-
decline in both primary and secondary markets. system-stability-review

50
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

BOX 2

1
International Monetary Fund’s Extended Fund Facility (IMF-EFF)
Programme – A Progress Update
Sri Lanka commenced discussions with the The key targets and elements of the current IMF-
International Monetary Fund (IMF) on obtaining a EFF programme, are discussed below.
funding arrangement linked to a macroeconomic
adjustment programme to restore macroeconomic Net International Reserves (NIR) Target
stability, debt sustainability and to rebuild the The NIR target is a QPC under EFF to gauge
linkages with the world, following the historic the reserve level maintained by the Central Bank
socio-economic and political crisis in 2022. In excluding the reserve related liabilities. The
September 2022, the IMF staff and the Sri Lankan reserves remained at depleted levels in 2022 and
authorities reached a staff level agreement for a
early 2023 as GOR declined notably, due to the
48-month arrangement under the EFF amounting
continued moderation of inflows to the financial
to SDR 2.286 billion (about US dollars 3 billion).
Subsequently, on 20 March 2023, the Executive account, external debt service payments to the
Board of the IMF approved the EFF as budget multilateral creditors, and net sales to the domestic
support to assist Sri Lanka’s economic policies foreign exchange market by the Central Bank
and reforms denoting the commencement of primarily for importation of essential imports during
the seventeenth IMF programme in Sri Lanka. the year. At the beginning of the programme, as
Accordingly, the first and second tranches of the at end March 2023, the reserve related liabilities
IMF-EFF totaling SDR 508 million (about were far higher than the reserve assets and thus NIR
US dollars 670 million) were disbursed in March stood at largely negative levels. The primary aim of
and December 2023, respectively. The IMF and achieving the NIR target under EFF is to ensure that
relevant authorities regularly monitor the progress the gross official reserve assets increase surpassing
under the EFF in terms of Quantitative Performance the liabilities and thereby maintaining NIR at
Criteria (QPCs), Continuous Performance Criteria positive levels. Thus far in the EFF programme, the
(CPCs), Monetary Policy Consultative Clause Central Bank has continued to build up reserves
(MPCC), Indicative Targets (ITs), and Structural by purchasing foreign exchange from the domestic
Benchmarks (SBs) as set out in the EFF programme. foreign exchange market on a net basis. As a
Achievement of these targets on behalf of Sri Lanka result, the gross official reserve level also witnessed
is the responsibility of the Government and the
a notable increase from US dollars 1.9 billion as at
Central Bank. In terms of performance, all QPCs
and ITs for end December 2023 were met except end 2022 to around US dollars 4.4 billion by end
for the IT on social spending, while most SBs falling 2023, and further to around US dollars 5.0 billion
due before end February 2024 were either met or by end March 2024.
implemented with delay. On 21 March 2024, a
The Central Bank’s Net Credit to the
staff level agreement was reached on economic
policies to conclude the second review of the IMF- Government (NCG) Target
EFF programme. Once the review is approved by Historically, successive Governments have resorted
the IMF Executive Board, Sri Lanka will have access to monetary financing from the Central Bank, which
to a further SDR 254 million (about US dollars 337 was one of the main causes for the elevation of
million) in financing. inflation to significantly high levels in 2022. The
Central Bank’s NCG is measured as the difference
To restore macroeconomic stability and public debt between the Central Bank’s claims against the
sustainability in Sri Lanka, the IMF-EFF programme
central government and deposits made by the
was designed as a comprehensive economic reform
central government in rupees at the Central Bank.
programme that rests on several key pillars. These
pillars include revenue based fiscal consolidation, Prior to the IMF programme, the Central Bank
a stronger social safety net to protect the most was compelled to regularly engage in monetary
vulnerable, a sovereign debt restructuring strategy financing of the budget deficit of the Government.
aimed at restoring public debt sustainability, a One of the main purposes of the IMF programme
multi-pronged strategy to restore price stability is to prevent any avenues that would enable the
and rebuild international reserves under greater Government to obtain monetary financing from the
exchange rate flexibility, policies to safeguard Central Bank, and this was achieved through the
financial stability, focused reforms to address enactment of the Central Bank of Sri Lanka Act No.
governance and corruption vulnerabilities, and 16 of 2023 (CBA). With no new monetary financing
growth enhancing broader structural reforms. and gradual offloading of existing holdings of

51
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

the government securities of the Central Bank, end the Sri Lankan authorities so far. In addition, the

1
December 2023 NCG target set out by the IMF programme has specified ITs related to central
was also achieved. government tax revenue, social spending by the
central government, cost of non-commercial
Monetary Policy Consultation Clause (MPCC) obligations (NCOs) for fuel and electricity, and
Sri Lanka’s inflation escalated to historically high Treasury guarantees. All ITs except for social
levels in 2022. The MPCC has been set to closely spending by the central government have been met
monitor the developments in inflation to ensure that under the programme as of December 2023.
Sri Lanka achieves the targeted level of inflation
in line with its objective of maintaining domestic Progress on Debt Restructuring
price stability. It monitors quarterly inflation on The Government has been engaging with the
predetermined target dates. Accordingly, quarterly external creditors to negotiate relief on external
average year-on-year inflation calculated based debt with the intention of bringing down the debt
on the Colombo Consumer Price Index (CCPI)
trajectory towards a sustainable path as envisaged
(2021=100), as per the method specified in the
by the IMF-EFF arrangement. There is significant
Technical Memorandum of Understanding (TMU)
progress in the external debt restructuring process.
of the IMF Staff Report was at 3.0 per cent by
December 2023. Hence, realised inflation by In November 2023, an agreement in principle was
December 2023 was within the lower outer band of reached between the authorities and the Official
MPCC of 2.0-3.5 per cent. Creditors Committee (OCC) and a preliminary
agreement with the China EXIM Bank and Sri
Primary Balance Target, Revenue, and Overall Lanka was also reached to restructure its claims
Budget Balance on Sri Lanka. Currently, Sri Lanka is engaging
Sri Lanka’s central government revenue collection closely with OCC and China EXIM Bank to reach
is identified to be one of the lowest in the world debt agreements consistent with the programme
and has led to significant primary balance deficits parameters and in a comparable manner. Sri Lanka
historically. The IMF-EFF programme requires is also engaging closely with external commercial
Sri Lanka to implement revenue based fiscal creditors in good faith through continuous
consolidation measures and introduce reforms dialogues and information sharing, aiming to reach
to social safety nets, fiscal institutions, and State a consensus on the debt treatment at the earliest.
Owned Enterprises (SOEs) that are aimed at
enhancing the efficiency and reducing the burden Additionally, the Government launched its
on government coffers. Supported by stringent fiscal Domestic Debt Optimisation (DDO) programme
consolidation efforts, the Government achieved in July 2023 and its key aspects were concluded
a primary surplus in 2023, which is well over in September 2023. The debt exchanges that were
the primary deficit target set under the IMF-EFF initiated were geared towards providing significant
for 2023. Meanwhile, the overall budget deficit liquidity relief to the Government, while contributing
for 2023 improved as a result of the significant to reducing future annual gross financing needs of
increase in revenue despite an increase in the Government to sustainable levels.
government expenditure.
Key Structural Benchmarks (SBs)
In addition, the central government tax revenue is
The ongoing IMF-EFF programme includes SBs
specified as an indicative target under the IMF-
in areas such as fiscal, SOEs, and social safety
EFF programme. During the recently concluded
net reforms, financial sector and governance.
programme review mission of the IMF, the notable
Significant progress has been made thus far
improvement in tax revenue collection was
commended. with respect to achieving these SBs. Major SBs
applicable to the Central Bank that have been met
Continuous Performance Criteria (CPCs) and include the enactment of the CBA, completion of
Indicative Targets (ITs) the asset quality review component of the bank
The IMF-EFF programme has specified two CPCs. diagnostic exercise for the two largest state owned
These include (i) non-accumulation of new external banks and the three largest private sector banks,
payments arrears by the nonfinancial public sector the development of a roadmap for addressing
and the Central Bank and (ii) no new Central banking system capital and forex liquidity shortfalls
Bank purchases of government securities in the and recapitalisation plan. Further, Parliamentary
primary market. These CPCs have been met by approval for the amendments to the Banking Act

52
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

was obtained although with a delay. With respect Governance

1
to SOE reforms, setting cost-reflective fuel pricing Addressing corruption vulnerability is critical to
and electricity tariff schedules with formula based ensure sustainable and inclusive economic recovery
adjustments among others are important SBs in Sri Lanka. Sri Lanka remains committed to
that were met. These efforts have already shown advancing governance and anti-corruption reforms
successful outcomes with improved profitability of as a main central pillar of the programme. In
chronically loss making entities such as the Ceylon this regard, Sri Lanka published the Governance
Electricity Board (CEB) and the Ceylon Petroleum Diagnostic Report in September 2023 making Sri
Corporation (CPC). Parliamentary approval of Lanka the first country in Asia to undergo the IMF
the 2024 Appropriation Act, obtaining Cabinet Governance Diagnostic exercise. Further, Sri Lanka
approval of a reduction in the limit on government recently published the Action Plan to implement
guarantees to 7.5 per cent of GDP, obtaining the key recommendations of the Governance
Cabinet approval on a strategy to build a Value Diagnostic Report, and this was commended by the
Added Tax (VAT) refund system and to achieve a IMF at the recent review. The IMF has emphasised
full repeal of Simplified Value Added Tax (SVAT) the need for sustained efforts to implement these
and introducing key performance indicators for tax reforms to address corruption risks, rebuild
compliance are some of the fiscal sector related economic confidence, and make growth more
SBs that have been met so far. robust and inclusive.

Table
1.20 Total Assets of the Financial System
2022 (a) 2023 (b)

Rs. bn Share (%) Rs. bn Share (%)

Banking Sector 23,928.0 76.2 24,611.5 74.1

Central Bank 4,510.3 14.4 4,205.4 12.7
Licensed Commercial Banks (LCBs) 17,226.3 54.9 18,121.0 54.6
Licensed Specialised Banks (LSBs) 2,191.4 7.0 2,285.0 6.9

Other Deposit Taking Financial Institutions 1,812.1 5.8 1,914.1 5.8

Licensed Finance Companies (LFCs) 1,610.2 5.1 1,692.0 5.1
Co-operative Rural Banks (c) 201.2 0.6 221.3 0.7
Thrift and Credit Co-operative Societies 0.8 0.0 0.9 0.0

Specialised Financial Institutions 328.9 1.0 728.7 2.2

Specialised Leasing Companies (SLCs) 1.0 0.0 1.2 0.0
Licensed Microfinance Companies 9.9 0.0 11.7 0.0
Primary Dealers 131.7 0.4 270.8 0.8
Stock Brokers 24.8 0.1 24.3 0.1
Unit Trusts / Unit Trust Management Companies 153.5 0.5 411.6 1.2
Market Intermediaries (d) 8.0 0.0 9.1 0.0
Venture Capital Companies N/A N/A N/A N/A

Contractual Savings Institutions 5,320.3 16.9 5,945.5 17.9

Insurance Companies 947.3 3.0 1,086.9 3.3
Employees' Provident Fund 3,491.8 11.1 3,895.1 11.7
Employees' Trust Fund 465.0 1.5 520.5 1.6
Approved Pension and Provident Funds 330.4 1.1 347.2 1.0
Public Service Provident Fund 85.9 0.3 95.8 0.3
Total 31,389.4 100.0 33,199.8 100.0

(a) Revised Sources: Central Bank of Sri Lanka

(b) Provisional Department of Co-operative Development
(c) Due to unavailability of data, asset base of Co-operative Rural Banks as Department of Labour
at end 2023 was taken to be same as the asset base as at end 2023 Q3. Department of Pensions
(d) Excluding Licensed Banks, Licensed Finance Companies & Specialised Employees’ Trust Fund Board
Leasing Companies, which are registered as Market Intermediaries Insurance Regulatory Commission of Sri Lanka
SANASA Federation
Securities and Exchange Commission of Sri Lanka
Unit Trust Association of Sri Lanka

53
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table Composition of Assets and Liabilities Table Composition of Deposits of the

1.21 of the Banking Sector 1.22 Banking Sector

1
2022 (a) 2023 (b) Change (%) 2022 (a) 2023 (b) Change (%)
Item
Rs. bn Share (%) Rs. bn Share (%) 2022 2023
Assets Rs. bn Share (%) Rs. bn Share (%) 2022 2023
Loans & Advances 11,312.5 58.3 11,017.6 54.0 5.5 -2.6
Investments 5,931.7 30.5 7,314.0 35.8 19.4 23.3 Demand Deposits 1,060.0 6.9 1,079.0 6.5 19.4 1.8
Others (c) 2,172.4 11.2 2,074.4 10.2 92.1 -4.5
Savings Deposits 3,713.0 24.3 4,293.0 25.8 -7.4 15.6

Liabilities Time Deposits 10,393.0 67.9 11,042.3 66.4 32.2 6.2

Deposits 15,298.7 78.8 16,623.6 81.5 18.8 8.7
Borrowings 1,871.6 9.6 1,389.0 6.8 -13.9 -25.8 Other Deposits 133.2 0.9 209.3 1.3 12.0 57.2
Capital Funds 1,598.1 8.2 1,766.9 8.7 18.5 10.6
Others 648.2 3.3 626.5 3.1 52.2 -3.4 Total Deposits 15,299.1 100.0 16,623.6 100.0 18.8 8.7
Total Assets/Liabilities 19,416.6 100.0 20,406.0 100.0 15.4 5.1
Source: Central Bank of Sri Lanka
(a) Revised Source: Central Bank of Sri Lanka
(b) Provisional (a) Revised
(c) Includes cash and bank balances, placements, (b) Provisional
reverse repurchase agreements and fixed assets

services, thereby promoting financial inclusion. liabilities as at end 2023, while borrowings
In 2023, 07 bank branches and 272 ATMs were accounted for 6.8 per cent. The share of time
established, while 04 bank branches and 31 deposits accounted for 66.4 per cent, while the
ATMs were closed. Accordingly, the total number savings and demand deposits accounted for
of banking outlets and ATMs had increased 25.8 per cent and 6.5 per cent, respectively,
to 7,517 and 6,943, respectively, by the end of total deposits as at end 2023. Accordingly,
of 2023. Total assets of the banking sector the Current and Savings Account (CASA) ratio
increased by Rs. 989.4 billion during the year increased from 31.2 per cent in 2022 to 32.3
and surpassed Rs. 20.0 trillion by end December per cent in 2023. Total borrowings of the
2023. Year-on-year growth of assets recorded banking sector decreased by Rs. 482.5 billion
5.1 per cent as at end 2023 compared to that (negative 25.8 per cent) in 2023 compared to
of 15.4 per cent as at end 2022. This slowdown a decrease of Rs. 301.4 billion (negative 13.9
in growth was mainly due to the conversion per cent) in 2022. This decrease was mainly
attributed to foreign currency borrowings which
of foreign currency denominated loans and
reported a negative growth of 40.8 per cent
receivables and investments to Sri Lanka rupee,
(US dollars 514.5 million) reflecting the impact
with the appreciation of the exchange rate.
of sovereign rating downgrades, while rupee
The tight monetary policy stance that prevailed
borrowings decreased by 19.4 per cent
during the first half of 2023 led to a year-on-
(Rs. 256.0 billion) during 2023.
year contraction of loans and receivables by 2.6
per cent as at end 2023 compared to a growth Off-balance sheet exposures of the banking
of 5.5 per cent as at end 2022. Meanwhile, the sector reported a growth of 15.6 per cent
year-on-year growth in investments accelerated (increase of Rs. 724.4 billion) during 2023
from 19.4 per cent at end 2022 to 23.3 per compared to a negative growth of 0.6 per
cent as at end 2023. The increase in investments cent (decrease of Rs. 26.3 billion) recorded
during the period under review was mainly during 2022. Significant increases were
due to an increase in financial assets at fair observed in foreign currency (FX) related off-
value through other comprehensive income by balance sheet purchases (Rs. 415.0 billion),
FX related off-balance sheet sales (Rs. 261.0
Rs. 828.2 billion and financial investments at
billion), undrawn credit lines (Rs. 118.4 billion)
amortised cost by Rs. 311.2 billion.
and documentary credit (Rs. 52.3 billion), while
Deposits continued to be the main source of guarantees and bonds (Rs. 223.8 billion), and
funding in the banking sector, representing acceptances (Rs. 3.8 billion) reported decreases
81.5 per cent of total on-balance sheet during 2023.

54
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure Off-Balance Sheet Exposure of the at 158.4 per cent at end 2023, well above the
1.25 Banking Sector as at end 2023

1
regulatory requirement of 100 per cent.
Others Documentary Credit
9% 7% Profitability improved during the year mainly
Guarantees and due to the decline in new impairment
Bonds
18% charges. Interest income of the banking sector
Acceptances
increased by 25.5 per cent, while the interest
Undrawn Credit Lines
38% 2%
expenses increased by 42.7 per cent during
FX Purchases 2023, resulting in a decrease in net interest
16%
income by 4.9 per cent. As a result, the net
FX Sales
10% interest margin decreased from 4.0 per cent
Source : Central Bank of Sri Lanka
at end 2022 to 3.6 per cent as at end 2023.
As indicated by the Stage 3 Loans Ratio, Non-interest expenses increased by Rs. 49.2
credit risk of the Banking Sector remained billion, largely due to the increase in staff costs
at an elevated level at end 2023. Stage 3 by Rs. 16.8 billion, while impairment for loans
Loans Ratio of the banking sector increased to and other losses decreased by Rs. 305.0 billion
12.8 per cent at end 2023, compared to 11.3 during 2023. As a result, profit before tax was
per cent at end 2022 mainly due to increased Rs. 294.4 billion in 2023 as per the regulatory
Stage 3 loans and contraction of loans and reporting, which was Rs. 116.6 billion higher
receivables, indicating concerns about the credit than the previous year. Profit after tax of the
quality of the sector. However, impairment for banking industry was Rs. 188.9 billion during
Stage 3 loans (including undrawn amounts) 2023 which was an increase of 22.8 per cent
grew by 18.4 per cent (year-on-year), improving compared to the previous year. The increase
the Stage 3 Impairment Coverage Ratio to 49.3 in profits was reflected in the Return on Assets
per cent at end 2023 compared to 44.9 per (ROA) before tax, which increased from 1.0 per
cent at end 2022. cent as at end 2022 to 1.5 per cent as at end
2023, while Return on Equity (ROE) after tax
Liquidity of the banking sector, as indicated increased from 10.2 per cent in 2022 to 10.6
by the Statutory Liquid Assets Ratio (SLAR) per cent in 2023. Further, the efficiency of the
and Liquidity Coverage Ratios (LCRs), banking sector deteriorated from 31.5 per cent
improved during 2023, mainly due to the as at end 2022 to 40.5 per cent as at end 2023,
high growth in liquid assets in the form of mainly due to the increase in operating costs.
rupee-denominated government securities.
The SLAR increased to 44.9 per cent at end Table
Profit of the Banking Sector
2023 and remained well above the minimum 1.23

regulatory requirement. Furthermore, Liquid Item

2022 (a)
Amount As a % of
2023 (b)
Amount As a % of
Assets to Total Assets also improved to 35.9 per (Rs. bn) Avg. Assets (Rs. bn) Avg. Assets
Net Interest Income 750.8 4.0 713.8 3.6
cent at end 2023 compared to 23.6 per cent Interest Income 2,079.4 11.0 2,609.0 13.0
at end 2022. A considerable improvement was Interest Expenses 1,328.6 7.0 1,895.2 9.4
Non-Interest Income 280.6 1.5 206.8 1.0
observed in LCRs of the banking sector during Net Fee & Commission Income 127.0 0.7 132.1 0.7
2023. The Rupee and All Currency LCRs of the Non-Interest Expenses 324.0 1.7 373.2 1.9

banking sector stood at 340.9 per cent and Staff Cost 173.2 0.9 190.0 0.9
Impairment for Loans & Other
286.4 per cent, respectively, at end 2023. In Losses
468.8 2.5 163.8 0.8

addition, the Net Stable Funding Ratio (NSFR) Profit Before Tax (after VAT) 177.8 0.9 294.4 1.5
Profit After Tax 153.8 0.8 188.9 0.9
introduced in 2019, which requires banks to (a) Revised Source: Central Bank of Sri Lanka
maintain sufficient stable funding sources, stood (b) Provisional

55
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure Profitability Ratios of the Table Composition of Regulatory Capital of

1.26 Banking Sector 1.24 the Banking Sector

1
5 25 Rs. bn Composition (%)
Item
2022 (a) 2023 (b) 2022 (a) 2023 (b)
4.0
4 Tier I: Capital 1,152.0 1,261.6 100.0 100.0
3.5 3.6 3.6 3.5 3.6 20 Share Capital 366.7 385.3 31.8 30.5
3.1
Statutory Reserve Funds 74.3 81.1 6.4 6.4
3 17.6
Per cent

13.2 13.4 15 Retained Profits 544.5 627.2 47.3 49.7

Per cent
11.4 10.6 General and Other Reserves 295.2 312.4 25.6 24.8
10.3 10.2
2 10 Others 67.2 77.2 5.8 6.1
2.0
1.8 Regulatory Adjustments (195.9) (221.6) (17.0) (17.5)
1.4 1.4 1.4 1.5
1 1.4 1.0 5 Tier II: Capital 277.7 290.2 100.0 100.0
1.1 1.0 1.1
0.9 0.8 0.9 Revaluation Reserves 35.4 42.4 12.7 14.6
0 0 Subordinated Term Debt 135.4 148.8 48.8 51.3
2017 2018 2019 2020 2021 2022 2023 General Provisions and Other 107.3 99.6 38.6 34.3
Interest Margin Return on Assets (After Tax) Regulatory Adjustments (0.5) (0.6) (0.2) (0.2)
Return on Assets (Before Tax) Return on Equity (RHS) Total Regulatory Capital Base 1,429.6 1,551.8
(a) Revised Source: Central Bank of Sri Lanka
Source: Central Bank of Sri Lanka (b) Provisional

The banking sector was largely in Meanwhile, the banking sector increased its
compliance with the minimum capital Tier 2 capital through issuance of subordinated
requirements during 2023. Capital adequacy debentures.
of the sector recorded an improvement at end
2023 compared to end 2022, as risk weighted
1.5.2 Non-Bank Financial
assets declined during the period, mainly due
Institutions Sector
to the overall credit contraction, increased Licensed Finance Companies (LFCs)
investments in government securities, and the
appreciation of the Sri Lanka rupee. Banks were Despite the challenges stemming from
encouraged to raise high quality capital buffers adverse economic conditions, the LFCs
to absorb the potential losses from the risks sector remained resilient with adequate
arising from challenging business conditions capital and liquidity buffers throughout the
and impact due to external sovereign debt year. The sector recorded growth in terms of
restructuring. As a result, banks increased Tier assets, deposit base, and profitability. However,
I capital through retention of profits (Rs. 82.7 the asset quality of the sector deteriorated as
billion), issuance of new shares (Rs. 18.6 billion), reflected by increasing Stage 3 loans. The LFCs
and increase in reserves (Rs. 17.2 billion) sector comprised 33 LFCs23 accounting for 5.1
during 2023. The regulatory capital of the per cent of total assets as of end 2023. There
were 1,827 branches, of which 1,198 branches
banking sector reported a growth of 8.5 per
(65.6 per cent) were located outside the Western
cent during the year, of which Tier I capital
Province. The asset base of the sector recorded
contributed 89.7 per cent of the increase.
growth of 5.1 per cent (Rs. 81.8 billion) reaching
Figure
Rs. 1,692.0 billion by end 2023, compared
1.27 Capital Ratios of the Banking Sector to the 10.9 per cent growth in 2022. This was
10,000 20 mainly driven by the significant growth of the
17.2 17.1
9,000 16.4 16.2 16.5 15.3
16.9 18
16
investment portfolio with increased investments
8,000
7,000 14 in government securities.
13.7 13.6 13.8
Rs. billion

6,000 13.4 13.1 13.2 12

Per cent

12.3
5,000 10 Loans and advances accounted for 68.6 per
4,000 8
3,000 6 cent of the total assets of the LFCs sector.
2,000 4
During 2023, the loans and advances portfolio
1,000 2
5,713 6,787 7,137 7,640 8,240 9,355 9,164
0 0
2017 2018 2019 2020 2021 2022 2023
23 Excluding ETI Finance Limited (The Commercial High Court of Colombo ordered that
Risk Weighted Assets Core CAR (RHS) Total CAR (RHS)
the winding up of ETI Finance Limited be carried out subject to the Supervision of the
Source: Central Bank of Sri Lanka Court on the 15th day of December 2023).

56
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

BOX 3

1
The Establishment of Business Revival Units in Licensed Banks to Support
Sustainable Economic Recovery
Background by the extraordinary macroeconomic circumstances
The challenging macroeconomic environment that and to ensure a transparent and effective resolution
prevailed during the recent years disrupted many policy framework on reviving the stressed borrowers
business entities limiting their income-generating of LBs, the CBSL issued a Circular in March 2024 on
capabilities and hence forcing them to avoid making “Guidelines for the Establishment of Business Revival
timely payments of loans, which resulted in impairing Units in Licensed Banks”. The Circular includes broad
the recovery process of licensed banks (LBs)1. As guidelines to give effect to further strengthen the
evidenced by the increase of non-performing loans2 already established Post COVID-19 Revival Units
of LBs from 5.2 per cent at end-2019 to 13.6 of LBs on Governance Framework and Resources,
per cent by the end of Quarter 3 in 2023, which Eligibility Criteria for Selection of Borrowers, Revival
marginally improved later to 12.8 per cent by the Mechanisms, Framework for Corporate Workouts,
end of 2023, the credit quality of the banking sector Accounting Considerations and Regulatory Reporting.
has deteriorated significantly. The revival of such
businesses would enhance economic activities and Objectives of Establishing Business Revival Units
employment opportunities and hence, contribute to in Licensed Banks
the rebound of the national economy. The purpose of Business Revival Units is to identify
and assist performing and non-performing borrowers
With the negative impact of the Easter Sunday of LBs who are facing challenges or may face
attacks in 2019, COVID-19 pandemic and adverse potential financial (and/or business) difficulties due to
macroeconomic conditions that prevailed during a reduction of income, cash flows or sales, reduction
the economic crisis, the Central Bank of Sri Lanka or impairment of business operations or temporary
(CBSL) issued multiple guidelines from time to time closure of business emanating from extraordinary
to LBs to provide relief to the affected borrowers macroeconomic circumstances.
whose debt servicing capacities were impaired.
Currently, LBs have established Post COVID-19 The Unit aims to revive businesses that are facing
Revival Units, and it is a timely requirement for actual or potential financial difficulties but are
considering a more standardised framework with fundamentally viable, intending to provide benefits
an enhanced scope in reviving fundamentally viable to such borrowers, leading to the revival of such
borrowers, by guiding LBs on eligibility criteria businesses, enhancing economic activities and
for selection of borrowers, revival mechanisms, contributing to the development of the national
corporate workout frameworks and governance economy.
framework.
Governance and Operational Framework of
With the onset of slowing down of economies owing Business Revival Units
to multiple reasons, the business revival frameworks
With a view to reviving viable businesses of
became widely accepted in many countries.
borrowers of banks, LBs shall formulate a revival
The “Out-of-Court Workouts” are negotiated
and rehabilitation policy for borrowers who are
restructurings between the borrower and lender/s
facing actual or potential financial difficulties but are
with or without the administrative guidelines. The
fundamentally viable, and these policies need to be
main advantages of “Out-of-Court Workouts” are
the expeditious implementation, relatively low-cost, reviewed and updated, at least annually.
preservation of confidentiality and greater flexibility A Business Revival Unit is expected to work in an
with respect to the terms and conditions of the orderly and an independent manner with Loan
restructuring. Origination, Legal, Risk Management and Credit
Alternatively, some countries practice the business Enforcement units to ensure that all relevant
revival processes through the involvement of judicial information and system access for the loans that may
procedures usually within the legal framework fall under the purview of the Business Revival Unit are
provided by the insolvency laws. shared effectively. Further, LBs are required to provide
the necessary staff and other resources to establish
By considering the above factors, to facilitate the Business Revival Units, and LBs whose operations
sustainable economic revival of businesses affected are geographically spread across the island are

57
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

encouraged to have the units regionally, based on A Framework for Corporate Workouts

1
the effectiveness of the operation. Under the business revival process a Framework
Fundamental viability assessment will be a crucial for Corporate Workouts is a newly introduced
task under the business revival process as the mechanism as an overarching framework for a
viability assessment procedures should be both mutually agreeable business revival plan between
effective and transparent. Under the fundamental a borrower and multiple banks as creditors. Since
viability assessment, both quantitative and qualitative this is a mutual agreement between parties, a court
indicators will be considered on a prudential basis. intervention would not be required. LBs may adopt
These indicators may include the assessment a collaborative approach to develop a common
regarding the profitability, leverage, liquidity, model for a Framework Agreement for Corporate
maturity profile of liabilities and other relevant Workouts that will govern negotiations of a workout
qualitative criteria. The viability assessment, to the agreement between LBs and any eligible corporate
extent possible, needs to be based on the audited borrower that seeks to avail of the Corporate
financial statements of the borrower. However, in Workout Framework. Currently, a common model
the absence of audited financial statements for the is being developed by LBs. Given due consideration
borrower owing to justifiable reasons, LBs may use to the possible complexities and cost involvement
appropriate and credible sources of information that may arise in the process of negotiating
at the discretion of the bank. In this regard, it will mutually agreeable conditions, this framework is
be important for LBs to ensure that borrowers recommended for corporate borrowers.
are cooperative, as LBs will consider only such
borrowers for revival. Way Forward
As per the proposed business revival mechanism
Further, LBs are encouraged to disclose their
of LBs, it is expected that distressed borrowers who
governance framework, operational procedures and
are engaged in business activities will be able to
viability assessment methodologies in their Annual
Report or any other published reports to enhance revive their businesses with the guidance of LBs, and
accountability and transparency. improved cash flows will be utilised to repay their
non-performing loans and thereby improving asset
Revival Mechanisms: Financial and Operational quality of the banking sector.
The Business Revival Unit shall use financial and/ or
Further, with the improvement in the macroeconomic
operational restructuring tools and techniques or any
environment of the country, the revival of businesses,
combination thereof to revive distressed but viable
businesses. especially the Micro, Small & Medium Enterprises
(MSMEs), would promote sustainable economic
 Financial restructuring tools would include debt growth and employment opportunities and hence,
forgiveness, debt rescheduling including grace contribute to the sustained development of the
periods for the payment of principal and interest, national economy. In addition, the other measures,
adjustment of interest rates, maturity extensions, which are in progress, such as establishment of
and provision of new financing, including interim National Credit Guarantee Institution (NCGI),
financing and exit financing. implementation of an enhanced legal framework
through the Secured Transactions Act and the
 Under operational restructuring, the Business
Revival Unit may consider proposing fundamental expansion of MSME definition to cover a wide scale
changes in the business’s operations or assets to of businesses will be conducive to revive the affected
restore commercial viability, developing a new businesses and accordingly, to contribute the
business plan/strategy, and enhancing operational enhancement of economic activities. 1
efficiency and profitability of such businesses,
improving cash management systems, reviewing
pricing strategy, and reviewing customer retention Notes
and/or acquisition strategies. Moreover, the 1. Licensed Banks include both licensed commercial banks and licensed specialised
Unit may also conduct awareness programmes banks, licensed under the Banking Act No.30 of 1988, as amended.
2. Non-performing loan means where contractual payments of a customer are past due
on rehabilitation initiatives, and provide credit for more than 90 days or have remained in excess of the sanctioned limit for more
counselling and business advisory services, in than 90 days and any other credit facilities classified as Stage 3 credit facilities under
Sri Lanka Accounting Standard 9 (SLFRS 09) (based on potential risk and impaired
reaching out to potential investors. status at origination).

58
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure Total Loans and Advances (Gross) by The LFCs sector’s Profit After Tax (PAT)
1.28 Productwise for 2022 and 2023

1
increased by 11.3 per cent from Rs. 42.8
Finance Leasing 531
549 billion in 2022 to Rs. 47.7 billion in 2023,
38
Hire Purchase
31 due to increased net interest income
Secured Loans and 415
Advances 446 and non-interest income. The increase in
Pawning Advances 219
230 profitability was reflected in increased ROA to
31
Loans against Deposits
32 4.3 per cent in 2023, compared to 3.7 per cent
Loans against Real Estates 27
16 in 2022. However, ROE of the sector marginally
Others 17
15 reduced to 12.4 per cent in 2023, compared to
0 100 200 300 400 500 600
Rs. billion
12.7 per cent in 2022, due to a comparatively
2022
Figure1.28 has been replaced due to a labelling
2023 higher increase in equity capital. The cost to
Source: Central Bank of Sri Lanka
error in the printed version.
income ratio increased to 81.1 per cent in
of the sector recorded a contraction of 3.2 per 2023, from 79.9 per cent in 2022.
cent (Rs. 38.0 billion) and amounted to The capital base of the LFCs sector improved
Rs. 1,160.4 billion compared to a growth of marginally by 3.9 per cent (Rs. 12.3 billion)
7.7 per cent in 2022. Finance leases dominated
to Rs. 329.0 billion by end 2023 compared
the loans and advances portfolio of the sector
to Rs. 317.0 billion recorded by end 2022.
and accounted for 41.5 per cent of total loans
The sector’s core capital and total capital ratios
and advances by end 2023, compared to 41.6
increased to 21.1 per cent and 22.3 per cent,
per cent by end 2022. Other secured loans
respectively, by end 2023 from the levels of 20.6
including vehicle loans accounted for 32.5 per
cent of total loans and advances by end 2023, per cent and 22.0 per cent, respectively, by end
compared to 33.8 per cent by end 2022. Loans 2022. However, 6 LFCs24 were non-compliant
against gold and loans against deposits also with the minimum core capital requirement and/
contracted by 4.7 per cent and 3.2 percent, or capital adequacy requirement.
respectively, during the year. Meanwhile, other On an aggregate basis, the LFCs sector
assets that mainly include cash and balances maintained liquidity well above the
with banks and financial institutions increased by
minimum required level during 2023. The
3.2 per cent in 2023 compared to the 23.2 per
overall regulatory liquid assets available in the
cent growth in 2022.
sector was Rs. 254.9 billion as at end 2023,
The asset quality of the LFCs sector against the stipulated minimum requirement of
deteriorated as indicated by the elevated Rs. 103.4 billion recording a liquidity surplus of
Gross Stage 3 Loans Ratio of 17.8 per cent Rs. 151.5 billion as at end 2023, compared to
at end 2023 compared to 17.4 per cent at Rs. 86.9 billion recorded as at end 2022.
end 2022. Stage 3 Loans classification where
LFCs were required to adopt 120 days past Customer deposits continued to dominate
the due date for classification of Stage 3 loans the liabilities of the LFCs sector accounting
was tightened to 90 days instead of the earlier for 55.3 per cent. The deposits increased
classification of 120 days on 01 April 2023. by 8.2 per cent (Rs. 70.8 billion) to Rs. 935.3
Meanwhile, the sector reported an impairment billion, while borrowings declined by 17.9 per cent
coverage ratio of 32.5 per cent for Stage 3 (Rs. 57.8 billion) to Rs. 264.6 billion during 2023.
loans at end 2023. Accordingly, the net Stage
3 Loans Ratio improved to 12.0 per cent by end 24 Regulatory restrictions such as deposit caps, lending caps, freeze acceptance of new
deposits, and caps on granting new loans have been imposed on LFCs which were
2023 from 12.3 per cent as at end 2022. non-compliant with the minimum core capital requirement and/or capital adequacy
requirements.

59
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Specialised Leasing Company (SLC) despite a marginal reduction in the ratio to

1
22.3 per cent by end 2023 from 23.2 per cent
There was only one SLC with an asset base reported by end 2022.
of Rs.1.2 billion and loans and advances of
Rs. 0.7 billion by end December 2023. Its Licensed Microfinance Companies
gross and net Stage 3 loans ratios stood at 57.8
The Licensed Microfinance Companies
per cent and 33.6 per cent, respectively. PAT of
(LMFCs) sector consisted of 4 companies
this SLC reduced by 94.3 per cent from Rs. 1.1
and reported 18.2 per cent growth of its
billion in 2022 to Rs. 0.1 billion in 2023 due to
asset base, reaching Rs. 11.7 billion by end
reduced net interest income. 2023. Micro loans accounted for the largest
Primary Dealer Companies in share of total assets and amounted to Rs. 8.9
Government Securities billion by end 2023 in comparison to Rs. 7.4
billion by end 2022, reporting a growth of 8.4
By end 2023, there were 5 LCBs25 and 5
per cent. The total deposit base of the sector
Primary Dealer Companies (PDCs)26 active
grew by 31.7 per cent in 2023 to Rs. 812.8
in the government securities market as
million in 2023 from Rs. 648.3 million in 2022.
Primary Dealers (PDs). Total assets of PDCs
The core capital level of the sector was Rs. 2.6
increased by 105.7 per cent to Rs. 270.8 billion
billion and all LMFCs were in compliance with
in 2023, compared to Rs.131.7 billion in 2022.
the minimum prudential regulations.
The total investment portfolio of government
securities amounted to Rs. 261.9 billion by end Unit Trusts
2023, which recorded a year-on-year increase The number of Unit Trusts (UTs) in operation
of 107.7 per cent from that of Rs. 126.1 billion increased to 84 as at end 2023 from 80
recorded in 2022. reported as at end 2022 while recording
PDCs reported a PAT of Rs. 35.8 billion a significant increase in total assets.
during 2023 compared to that of Rs. 1.7 The number of UT management companies
billion reported during 2022, indicating a remained unchanged at 16 as at end 2023
significant increase in profitability due to compared to end 2022. The funds of the UTs
increase in interest income, capital gains were dominated by Money Market Funds and
and increased revaluation gains. ROA and Income Funds jointly accounting for 84.9 per
ROE of PDCs enhanced to 25.7 per cent and cent of the UT industry. Total assets of the UTs
139.3 per cent, respectively, by end 2023 from increased significantly by 171.0 per cent to
3 per cent and 19.9 per cent, respectively, Rs. 406.5 billion by end 2023 from Rs. 150
recorded in 2022. Equity of PDCs increased billion at end 2022. The number of units issued
by 142.4 per cent mainly due to profits earned also increased to 13,371 million as at end
during the year. The Risk Weighted Capital 2023 from 6,283 million reported as at end
Adequacy Ratio of PDCs was well above the 2022. In addition, the total number of unit
minimum required amount of 10 per cent holders increased to 93,450 at end 2023 from
67,912 reported as at end 2022. The share of
25 Excluding Pan Asia Banking Corporation (participation in government securities at investments in government securities by UTs as a
primary auction was suspended w.e.f. 15.08.2017).
26 Excluding Entrust Securities PLC (participation in government securities at primary percentage of total assets significantly increased
auction has been restrained w.e.f. 24.07.2017. A creditor winding up was filed
by one of the unsecured investors and on 17.06.2022 the winding up order was to 77.2 per cent as at end 2023 from 56.7
given by the courts. However, the winding up case is still pending before the courts
due to other legal proceedings), and Perpetual Treasuries Ltd. (business was initially per cent reported as at end 2022. Meanwhile,
suspended on 06.07.2017 and extended for a further period of 06 months
w.e.f. 05.01.2024) investment in equity as a share of UT assets

60
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

decreased to 4.5 per cent as at end 2023 insurance increased to 252.0 per cent by end

1
compared to 7.9 per cent as at end 2022. 2023 from 210.0 per cent a year ago. In long
term insurance, CAR improved to 358.0 per cent
Insurance Sector
from 303.0 per cent, a year ago.
The insurance sector, which comprises
long term and general subsectors, showed Employees’ Provident Fund
mixed performance during 2023. The The net worth of the Employees’ Provident
sector comprised 28 companies in operation Fund (EPF) significantly increased by 11.5
as at end 2023, of which 14 operated as per cent, year-on-year, by end 2023
exclusive long term insurance companies and compared to end 2022. This growth is
12 as exclusive general insurance companies, attributed to the income generated through
while 2 as long term and general insurance the prudent investments of the Fund. The total
businesses. In addition, 78 insurance brokering liability to the members also increased by
companies were in operation as at end 2023. 12.9 per cent during this period. Meanwhile,
The insurance sector recorded an increased total contributions received for the year 2023
gross written premium (GWP) in 2023 compared increased by 8.2 per cent, while the total
to 2022. During the year, GWP in the long amount of refunds disbursed to the members
term and general insurance sectors grew by and their legal heirs significantly increased
12.9 per cent and 3.4 per cent, year-on-year. by 32.4 per cent. Consequently, the net
Insurance penetration in the country, measured contribution of the Fund was reported at a
by annualised GWP as a percentage of GDP negative Rs. 5.3 billion in 2023, compared to a
was only 1.0 per cent by end 2023. Assets positive contribution of Rs. 31.6 billion recorded
of the long term insurance sector expanded in 2022.
whilst assets of the general insurance sector
The total investment income of the Fund
contracted. Asset growth of the long term
amounted to Rs. 469.3 billion in 2023,
insurance sector was 22.6 per cent (year-on-
registering a notable increase of 48.6 per
year) whilst the assets of general insurance
cent compared to Rs. 315.8 billion in 2022.
contracted by 4.2 per cent (year-on-year) at
Interest income continued to be the predominant
end 2023. However, given the higher asset
source of income for the Fund, growing by
base of the long term insurance sector, total
26.7 per cent to Rs. 442.4 billion in 2023 from
insurance sector assets grew by 14.7 per cent,
Rs. 349.3 billion in 2022. However, dividend
year-on-year, in 2023. Profitability of general
income witnessed a decline of 60 per cent to
insurance sector was low in 2023 compared
Rs. 3 billion in 2023, compared to Rs. 7.5
to 2022. Profit before tax of the long term
billion in 2022. Despite a substantial increase
insurance sector grew by 30.6 per cent in 2023
in the prices of goods and services, the Fund
compared to 2022. However, profit before tax
successfully maintained the operating expenses
of general insurance sector decreased by 25.6
to gross income ratio at 0.49 per cent in 2023.
per cent during this period. Similarly, return on
Nevertheless, the tax expenditure of the Fund
assets and return on equity of general insurance
increased due to increased investment income
deteriorated during 2023 compared to the
during 2023.
previous year whilst the same indicators for long
term insurance improved. During the period EPF chose to pursue the Debt Exchange
under review, the capital position of both long option after carefully considering the two
term and general insurance sectors improved. alternatives provided under the DDO
Capital Adequacy Ratio (CAR) of general operation. On 04 July 2023, the Ministry of

61
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table Five-year Performance to 75,485 as at end 2023 from 68,488 as at

1.25 Summary of EPF

1
end 2022. The total member balance of the
Item 2019 2020 2021 2022 2023*
Net Worth of the Fund (Rs. bn) 2,540.4 2,824.3 3,166.1 3,459.9 3,857.4 ETF decreased by 0.2 per cent and reached
Total Liability to the Members (Rs. bn)
Total Contributions (Rs. bn)
2,497.6 2,767.8
157.2 150.7
3,066.9 3,380.6 3,817.9
165.7 194.6 210.6
Rs. 458.5 billion as at end 2023. The total
Total Refunds (Rs. bn) 126.3 109.7 118.2 163.0 215.9 contributions received to ETF increased by 7.4
Net Contribution (Rs. bn) 30.9 41.0 47.5 31.6 (5.3)
Interest Rate on Member Balance (%) 9.25 9.00 9.00 9.00 13.00 per cent (year-on-year) and reached Rs. 37.1
Total Number of Member Accounts (mn) 19.4 19.8 20.3 20.4 20.9
Active Number of Member Accounts (mn) 2.9 2.6 2.5 2.7 2.7
billion, while total benefits paid to members
* Provisional Source: EPF Department, Central Bank of Sri Lanka
increased by 53.0 per cent (year-on-year) and
reached Rs. 38.3 billion during 2023.
Finance, Economic Stabilization and National
Policies announced the DDO operation, offering 1.5.3 Performance of Financial
two options for Superannuation Funds. The first Markets
option allowed EPF to exchange a minimum
required amount of its existing Treasury bonds Domestic Money Market
for 12 new series maturing between 2027 and Liquidity shortage in the domestic money
2038. This exchange would subject EPF to an market declined considerably by end 2023.
income tax rate of 14 per cent per annum on This was due to liquidity injections through
its taxable income derived from the Treasury foreign exchange purchases of the Central
bond portfolio. Alternatively, if EPF chose not Bank, liquidity provision through term reverse
to exchange its existing Treasury bonds, a fixed repurchase auctions to LCBs, reduction in the
30 per cent tax rate would be applied to the SRR and liquidity provision through the Liquidity
taxable income generated from its Treasury Assistance Facility (LAF) to certain licensed
bond portfolio. After carefully considering these banks. The permanent liquidity injection through
options, the Monetary Board of the CBSL, acting SRR reduction during 2023 was around Rs. 200
as the custodian of the EPF, chose to pursue the billion. In addition, the Central Bank conducted
Debt Exchange offer. This decision, made with a outright auctions to purchase Treasury bonds
long-term perspective and in the best interest of from secondary market and injected Rs. 8.5
the Fund's members, involved the EPF tendering billion liquidity on a permanent basis. Therefore,
Rs. 2,667.5 billion face value of Treasury bonds the market liquidity indicated an asymmetric
for Debt Exchange. distribution in 2023, where certain domestic
banks recorded liquidity deficits while most
Employees’ Trust Fund
Figure Open Market Operations, Standing Rate Corridor and
The total assets of the Employees’ Trust 1.29 Behaviour of Money Market Interest Rates during 2023
500 18
Fund (ETF) increased by 11.9 per cent, 400
16
300
year-on-year, to Rs. 520.5 billion at end 200
100
14
12
2023. Investments made by the ETF increased 0
Rs. billion

Per cent

-100 10
-200
by 8.3 per cent. Out of these investments, 93.8 -300
-400
8
6
per cent was invested in government securities -500
-600 4

as at end 2023. ETF managed to earn a return

-700
2
-800
-900 0
on investment of 12.3 per cent on its member
29-Oct-23

28-Nov-23

28-Dec-23
29-Sep-23
30-Aug-23
31-Jul-23
3-Mar-23
2-Jan-23

1-Feb-23

2-May-23

1-Jun-23
2-Apr-23

1-Jul-23

balances in 2023. Out of 15.5 million member

accounts of the ETF, only 2.5 million accounts Overnight Repo
Overnight Reverse Repo
Short-Term Repo
Short-Term Reverse Repo
Long Term Repo
Long Term Reverse Repo

were active as at end 2023. The number of Standing Deposit Facility

SDFR (RHS)
Standing Lending Facility
SLFR (RHS)
Overnight Liquidity
AWCMR (RHS)

employers contributing to the fund increased Source: Central Bank of Sri Lanka

62
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

foreign banks recorded a notable liquidity secondary market yield curve indicated signs

1
surplus. Daily average transaction value in the transitioning to the regular shaped curve
call money market decreased to Rs. 8.6 billion by the end of 2023. Further, liquidity in the
in 2023 from Rs. 15.7 billion in 2022. However, secondary market of government securities
daily average transaction value in the repo marginally improved during 2023 which was
market increased to Rs. 14.4 billion in 2023 observed through increased daily average
from Rs. 6.8 billion in 2022 indicating increased trade volumes and daily average number
preference for collateralised lending by financial of trades in the market. Accordingly, during
2023 daily average trade volumes and daily
institutions.
average number of trades increased to Rs 25.7
Domestic Foreign Exchange Market billion and 80.6 respectively, from Rs 12.5
billion and 39 recorded in 2022. However, the
The rupee appreciated by 12.1 per cent secondary market transactions were skewed
against the US dollar during 2023. The towards short term maturities. During 2023, a
USD/LKR exchange rate, which was 363.11 at net foreign inflow of US dollars 210 million into
end 2022, was at 323.92 at end 2023. The the government securities market was recorded
Central Bank has allowed the exchange rate to despite a net foreign outflow of US dollars 216
be determined by market forces since 07 March million during the second half of 2023.
2023. Meanwhile, domestic FX market liquidity
conditions improved following the gradual Equity Market
relaxation of the mandatory FX sales requirement The domestic equity market demonstrated
by licensed banks to the Central Bank and a mixed performance during 2023 in terms
inflows under the IMF-EFF. These developments of price indices, market capitalisation and
caused market participants’ anticipation daily turnover. Overall, both All Share Price
of further appreciation and induced more Index (ASPI) and Standard & Poor’s Sri Lanka
conversions of remittances and export proceeds. 20 (S&P SL20) indices demonstrated positive
However, rupee depreciation pressures surfaced momentum throughout the year. The increase
during the early part of the second half of 2023 in price indices was significant following the
as banks bought FX in the domestic market
announcement of the DDO perimeter excluding
to cover their FX liabilities as the Government
the banking sector during July-August period.
was settling US dollar denominated Sri Lanka
However, the movement of the indices stalled
Development Bonds held by banks in rupees
towards the end of 2023 with a negative
under the DDO programme. However, Central
Bank interventions in the FX market reduced Figure Movements of Price Indices and
the pressure on the rupee, and the exchange 1.30 Market Capitalisation
rate stabilised. Further, trading volumes in the 15,000 6,000
5,500
domestic FX inter-bank market increased by 13,000
5,000

56.7 per cent to US dollars 15.0 billion in 2023

11,000
Index Value

4,500
Rs. billion

9,000 4,000
compared to US dollars 9.6 billion recorded in 7,000 3,500

2022. 5,000
3,000
2,500

Government Securities Market

3,000
2,000
1,000 1,500
Jan
Feb
May
Jun
Aug
Sep
Oct
Dec
Jan

Jun
Jul
Aug
Oct
Nov
Dec
Feb

May
Jun
Jul
Sep
Oct
Nov
Jan
Feb
May
Jul
Aug
Sep
Nov
Dec
Mar

Mar
Apr

Mar

Apr

In line with policy rate reductions, secondary 2020 2021 2022 2023

market yields also decreased resulting in Market Closed

Market Capitalisation (RHS)
Circuit Breakers Activated
ASPI
S&P SL20 Index
a downward shift in the yield curve. The Source: Colombo Stock Exchange

63
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Figure
Foreign Participation in CSE
companies in the CSE, collectively raising Rs.
1.31

1
34.6 billion. This marked a notable increase
140
120
from the Rs. 12.7 billion raised in 2022, spread
100 across 10 IPOs by 4 companies. Notably,
80 debentures featuring both fixed and floating
60
interest rates were issued during the year. The
Rs. billion

40
20 fixed interest rates varied from 13.50 to 29.50
0 per cent, compared to the previous year's range
-20
of 15.42 to 28.00 per cent.
-40
-60
2016 2017 2018 2019 2020 2021 2022 2023 1.5.4 Financial Inclusion
Foreign Purchases Foreign Sales Net Foreign Purchases
Source: Colombo Stock Exchange The Central Bank continued to promote
financial inclusion during 2023. However,
movement in ASPI owing to proposed tax
the enactment of the CBA resulted in a
amendments, increased food inflation and
discontinuation of the Central Bank funded loan
upward revision of energy prices. Accordingly, schemes for Micro, Small and Medium Sized
ASPI and S&P SL20 indices grew by 24.9 per Entrepreneurs (MSMEs) and the decision of the
cent and 15.7 per cent respectively, during the Governing Board to phase-out loan schemes
year 2023 while market capitalisation enhanced carried on behalf of the Government will further
by 9.7 per cent and stood at Rs. 4,233.3 billion scale down the MSME lending activities of the
by end 2023. The Colombo Stock Exchange Central Bank. Promoting financial inclusion
(CSE) recorded an average daily turnover of Rs. has become one of the statutory functions of
1,696.81 million in 2023, which was a 43 per the Central Bank. Further, Phase I of National
cent decline compared to Rs.2,972.3 million Financial Inclusion Strategy (NFIS) will be
recorded in 2022. Foreign participation in the concluded in 2024 and the Central Bank
domestic equity market in terms of net foreign expects to implement the Phase II of the NFIS
purchases declined in 2023 compared to the from 2025. A comprehensive Financial Literacy
previous year. Accordingly, the market recorded Roadmap for Sri Lanka has been developed
Rs. 4.3 billion (approximately US dollars 13.27 and will be launched in May 2024 with the
million) net foreign inflows during the year objective of improving the financial behaviour
2023 compared to an inflow of Rs. 30.6 billion of the public. Moreover, the Central Bank
(approximately US dollars 74.3 million) recorded conducted awareness programmes during the
during the previous year. year to enhance financial literacy throughout the
country.
Corporate Debt Securities Market
1.5.5 Financial Infrastructure
Commercial Paper (CP) issues were less in
2023 compared to 2022. During 2023, only
Payment and Settlement Systems
Rs. 1.3 billion was raised through CPs compared In 2023, Sri Lanka’s economy witnessed
to Rs. 2.0 billion raised through CPs in 2022. a significant acceleration in digitalisation,
The interest rates of CPs varied between 17.0 evident from sustained high growth in
and 26.5 per cent during 2023 compared to retail payment systems. This trend reflects a
the range of 11.0 to 36.0 per cent reported in growing preference for digital payment methods
the previous year. Throughout 2023, 16 IPOs in the country. The success of this shift can be
of corporate debentures were launched by 5 attributed to the Central Bank's digital payment

64
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.32 Retail Transactions

300

250

200
Volume of Retail Transactions
14

12
Value of Retail Transactions

1
10

Rs. trillion
Million

150 8

6
100
4
50
2

0 0
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023

Cheques Online Bulk Payments (SLIPS) Instant Payments and Fund Transfers (CEFTS) Payment Cards

promotion policy as well as strategies developed carried out through more traditional other
by the National Payments Council (NPC), the payment instruments such as payment
industry consultative committee on payment and cards and cheques. Transactions carried out
settlement systems. through the Real Time Gross Settlement (RTGS)
To ensure the smooth functioning of system, which enables large value transactions
payment systems, the Central Bank for individuals and corporates, as well as
implemented policies to ensure continuous interbank transactions, continued to increase.
system availability and sufficient liquidity Due to the significant improvement in market
in order to meet the growing demand for liquidity observed in 2023, transactions related
digital payment channels. The increasing
to the Intraday Liquidity Facility, which facilitates
popularity of online real time fund transfers
participants intraday liquidity requirements for
among the public led to the country's Instant
RTGS operations and the Standing Lending
Payment System, i.e., Common Electronic
Fund Transfer Switch (CEFTS), recording the Facility, which is settled through the RTGS
highest growth among digital payment systems system, decreased in both value and volume.
in 2023. Accordingly, CEFTS based payment Further, embarking on a policy of regional
channels including LankaPay Online Payment integration of payment systems, LANKAQR was
Platform (LPOPP), which facilitates payments to integrated with Unified Payments Interface (UPI)
government institutions such as tax payments in India and UnionPay International in China in
and customs duties directly from bank accounts, 2023, enabling visitors using those systems to
LANKAQR transactions, and JustPay, which seamlessly pay via LANKAQR in Sri Lanka.
allows customers to pay by linking multiple bank
accounts to any mobile payment app, including The Central Bank ensured payment and
Fintech apps, as well as payment card use settlement systems stability via closely
experienced a significant growth in 2023. monitoring market trends, taking swift policy
During the year 2023, there was a notable decisions when necessary and increasing
shift towards online instant payments via stakeholder awareness as appropriate to
CEFTS, as value of instant payments and mitigate the emerging risks in the payment
fund transfers surpassed transactions sector in the country. Accordingly, the Central

65
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Bank continues to develop the digital payment Legal Reforms Related to the

1
infrastructure in close coordination with the Financial Sector
industry. This effort aims to ensure that Sri Lanka
During September/November 2023, CBA
possesses an inclusive and competitive payment
and Banking (Special Provisions) Act, No.
industry that supports both the stability of the
17 of 2023 (BSPA) were enacted and came
financial system and the economic recovery.
into operation. Amendments to the Banking
Anti-Money Laundering and Act No. 30 of 1988 were introduced for further
Countering the Financing of strengthening and streamlining the provisions
Terrorism and currently it is under submission to the
Parliament. Further, during the year 2023, the
Money Laundering and Terrorism Central Bank provided technical assistance to
Financing (ML/TF) present substantial risks the Ministry of Finance in drafting of the Micro
to a nation's financial stability, causing Finance and Credit Regulatory Act and Financial
distrust, market distortions, regulatory Asset Management Companies Act. Other
complexities, reputational damage, and legal reforms undertaken during the year 2023
systemic hazards. In 2023, the Central include drafting of amendments to the Finance
Bank through the Financial Intelligence Unit Business Act, No. 42 of 2011; Finance Leasing
(FIU) carried out its duties mandated by the Act, No. 56 of 2000; Payment and Settlement
Financial Transactions Reporting Act, No. 6 Systems Act, No. 28 of 2005; Foreign Exchange
of 2006 (FTRA), by receiving and analysing Act, No. 12 of 2017; and drafting of a new law,
1,369 Suspicious Transaction Reports (STRs) namely, Trading Clearing and Netting Act (TCN
and disseminating 236 STRs to LEAs/RAs. Act) for development of the Capital Market.
Under the risk based supervisory approach, Financial Consumer Protection
FIU conducted 23 onsite inspections, resulting
in issuance of 15 show cause letters and 13 In 2023, the Central Bank implemented a
significant initiative aimed at fortifying the
penalty letters to Financial Institutions (FIs),
financial consumer protection framework
collecting Rs. 21.2 million as penalties. Further,
for Financial Service Providers under its
in September 2023, FIU published the 2021/22
regulatory purview. The new Regulations
National Risk Assessment (NRA) on ML/TF,
on Financial Consumer Protection, No. 1 of
outlining significant threats, vulnerabilities, and
2023 was issued under Section 10(c) of the
risks encountered by Sri Lanka. Following the
Monetary Law Act, No. 58 of 1949 (MLA) on
NRA findings, the National AML/CFT Policy for
8 August 2023. The strengthened framework
2023-2028 was prepared and approved by
encompasses comprehensive measures
the Cabinet of Ministers. Aiming at preparing designed to enhance transparency, fairness,
the key stakeholders for the AML/CFT Mutual and responsible business conduct within the
Evaluation in 2025, Institution-wise Action financial sector, thereby fostering a more
Plans were prepared and shared among the resilient and consumer-centric financial system.
stakeholders for implementation. Furthermore, a In addition to the robust two-tier complaint
Task Force for AML/CFT was appointed by the handling procedure, these Regulations also
Cabinet of Ministers to monitor the progress of provide necessary authority and framework for
the implementation of these Action Plans. the Central Bank to carry out market conduct

66
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

supervision, which is one of the effective Regulation and Supervision of

1
mechanisms available for the regulators in Foreign Exchange
supervising financial consumer protection and
As the government agent for implementing
the Regulations will come into force gradually
the provisions of the Foreign Exchange
in 2024. These steps by the Central Bank are
Act, No. 12 of 2017, the Central Bank
aimed at maintaining the integrity and stability of
is held responsible for regulating and
the financial system while prioritising the welfare
promoting foreign exchange transactions
of financial consumers in Sri Lanka.
of the country. Throughout the year,
Deposit Insurance and Resolution significant enhancements were made to the
Authority Export Proceeds Monitoring System (EPMS), a
collaborative effort with the Sri Lanka Customs,
The Central Bank has been designated as
Licensed Banks and selected large exporters
the authority responsible for the resolution
aimed at capturing relevant information to
of financial institutions under Section
monitor repatriation of export proceeds into
62 of CBA. Accordingly, the Central Bank
Sri Lanka, as per the Rules on “Repatriation of
contributed to the enactment of the BSPA and
Export Proceeds into Sri Lanka” issued under
established the Deposit Insurance and Resolution
the Monetary Law Act No. 58 of 1949. These
Department for the efficient exercise of its
measures helped in reaching an export proceed
resolution powers strengthening the Central repatriation figure of US dollars 14,997 million,
Bank's resolution authority and enhancement of of which US dollars 4,009 million was converted
the financial system stability framework through into Sri Lanka rupees, thereby providing liquidity
the administration of a Deposit Insurance to the domestic foreign exchange market.
Scheme, aligning with global standards.
Further, the activities of Restricted Dealers
The Sri Lanka Deposit Insurance Scheme (RDs) who are authorised to engage in
(SLDIS) was re-established under the money changing business, underwent
provisions of BSPA to uphold the public stringent monitoring. As a result, the
confidence in the financial system and to performance of such RDs notably improved, with
promote and contribute to the stability of a figure of US dollars 388 million deposited into
the financial system. The SLDIS comprised 63 the banking system as compared to that of US
Member Institutions and had paid compensation dollars 159.8 million in 2022.
of Rs. 505.0 million during 2023 upholding
Credit Information
the confidence of the depositors in the financial
system safety net. Further, the Government The CRIB continued to play a pivotal role
of Sri Lanka, the World Bank and the Central in mitigating default risk of the Financial
Bank are engaged in the Financial Sector Institutions and fortifying the financial
Safety Net Strengthening Project which aims sector's resilience. Accordingly, CRIB credit
at strengthening the financial and institutional scoring provides a holistic assessment of
capacity of SLDIS in line with international best individuals' creditworthiness beyond traditional
practices for development of an effective deposit metrics which empowers borrowers to
insurance system which is vital for financial proactively manage their credit profiles and
sector performance and system stability. enables lenders to expedite lending decisions

67
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

BOX 4

1
Market Conduct Supervision:
Upholding Trust in the Financial System
Introduction laws and regulations of FSPs and take appropriate
Recent financial debacles and crises, even in several enforcement actions to ensure full compliance. In
advanced and well-regulated economies over the risk-based approach, supervisors focus on risk
the past couple of decades, have highlighted the analysis and mitigations. Accordingly, the risk-based
criticality of upholding the trust and confidence approach of MCS is more forward looking and the
of public, especially financial consumers, on supervisory activities are fine tuned according to the
financial institutions, financial authorities and risk levels identified prior and during the supervisory
the financial system as a whole. Hence, financial cycle.
authorities around the world have been compelled
Main Supervisory Tools
to reinforce and reshape the scope and approaches
to the financial system oversight function with an MCS encompasses a range of supervisory tools
increased focus on widening financial inclusion such as media watch and product reviews,
and strengthening the financial consumer thematic reviews, mystery shopping and calls, self-
protection provided to the financial consumers by assessments by FSPs and direct engagement with
Financial Service Providers (FSPs). In this context, FSP leadership focusing on market conduct risks
strengthening the financial consumer protection and controls to emerging issues, validating specific
framework through effective regulations, supervision, practices, and gauging control adequacy. These
and consumer empowerment is becoming one of tools collectively facilitate supervisors to have an
the priorities of financial authorities worldwide. effective MCS.
For example, as per the 2022 Global State of
Financial Inclusion and Consumer Protection
Survey conducted by the World Bank, out of 113 Figure The Market Conduct Supervision
B 4.1 Process
responded jurisdictions, 109 jurisdictions have
regulations on financial consumer protection. Constant Monitoring
Market Monitoring
Information
Market Conduct Supervision Pre-Planning

Market Conduct Supervision (MCS) is one of the Onsite Examination Offsite Supervision
1. Developing a plan 1. Analysis of Reports
pillars of financial consumer protection and is used 2. Conducting 2. Conducting
by regulators in achieving the overarching goal 3. Reporting 3. Reporting
4. Follow-up 4. Follow-up
of market integrity and trust among depositors, 5. Adjusting the plan 5. Adjusting the plan
6. Recording data 6. Recording data
borrowers, investors, stakeholders, and the public, Reporting, Monitoring &
contributing to financial system stability and Enforcement
Source: Central Bank of Sri Lanka
economic growth. A comprehensive or full scope
MCS involves a continuous review of FSPs' products,
services, systems and procedures, and practices
The Market Conduct Supervision of the Central
with prompt corrective and enforcement actions.
Bank
Despite some similarities in its goals, approach
process, MCS is different from prudential supervision Pursuing the development of global financial
of financial institutions in terms of its concepts and consumer protection regulations, the Central Bank
focus areas and tries to provide fair outcomes for established the Financial Consumer Relations
both financial consumers and FSPs. Department (FCRD) in 2020 and issued the
Regulations on Financial Consumer Protection,
MCS Approaches No. 01 of 2023, under Section 10(c) of the then
As MCS is designed and implemented under Monetary Law Act in August 2023, covering
different operating environments and structures, all financial institutions under its purview. The
two main approaches can be adapted to suit the Regulations, which will be fully effective from August
regulatory objectives, resources, and skill levels 2024, integrate and strengthen the existing customer
as well as the development of the industry and protection frameworks issued under different statutes
economy as a whole. In a compliance-based and empower the Central Bank to supervise the
approach, supervisors focus on non-compliance with market conduct of FSPs regulated by it.

68
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

With the empowerment by the Regulations, the market conduct supervisory manual integrating

1
Central Bank has arranged to commence its MCS its supervisory approach, tools, and process with
under a risk-based approach while giving due required details and is expected to commence
consideration to the reported non-compliances and the first full scope MCS during second half of
malpractices of FSPs. As a precursor to MCS, FCRD 2024. Going forward, the Central Bank expects
conducted a thematic review on the complaint to have greater co-operation from market conduct
handling mechanism of FSPs. The assessment supervisors in other countries and international
helped set the background for the MCS process networks such as Alliance for Financial Inclusion
while providing an opportunity for FSPs to improve (AFI) and the International Financial Consumer
their internal redress mechanism. Protection Organisation (FinCoNet) to gain
necessary experience and expertise for effective
Conclusion and Way Forward implementation of MCS contributing to a more
As countries navigate through increased risk resilient and stable financial system upholding the
and complexities of modern financial products trust and confidence of the financial consumers. 1
and services, upholding public confidence in the
financial system is a key element in achieving References

financial inclusiveness and system stability. A robust 1. An Introduction to Developing a Risk-Based Approach to Financial
MCS as the main mechanism in regulating financial Consumer Protection Supervision (2022) - World Bank
consumer protection always fosters fair treatment for 2 Establishing
. a Financial Consumer Protection Supervision Department (2021)
– World Bank
financial consumers and responsible market conduct
3. Financial Consumer Protection and New Forms of Data Processing
of FSPs. This will pave the way for increased public Beyond Credit Reporting (2018) – World Bank
trust in the overall financial system. 4 Good Practices for Financial Consumer Protection (2017) – World Bank
5. Market Conduct Supervision in Small Countries: The Case of Armenia
In this regard, the Central Bank is developing (2013) – World Bank

the necessary mechanisms, competencies, and 6. Market Conduct Supervision of Financial Services Providers A Risk-
Based Supervision Framework (2016) - Alliance for Financial Inclusion
procedures for conducting MCS of FSPs in 7. Market Conduct Supervision – A Toolkit (2023) - Alliance for Financial Inclusion
terms of the Regulations No. 01 of 2023. As 8. The Global State of Financial Inclusion and Consumer Protection (2022) - World
of 2023, the Central Bank has developed a Bank

based on reliable predictive models. CRIB also movable assets in Sri Lanka. This framework
focuses on leveraging advanced technology will protect the rights of all types of regulated
to analyse lending market data, providing financial institutions, encouraging them to
insights into future market developments, provide financing on moveable collateral.
changes in consumer behaviour, and evolving
1.6 Fiscal Sector Developments
societal needs. Users of lending institutions
have full access to this value-added analytical 1.6.1 Key Fiscal Balances
product offered by CRIB for objective and
Despite the challenging socio-political
structured evaluation of SMEs and MSMEs.
environment, the stellar fiscal performance
Further, to enhance financial inclusivity and
in 2023, driven by stringent consolidation
encompass the informal sector, which lacks measures such as revenue enhancement
comprehensive credit data and documentation, and expenditure rationalisation, noticeably
CRIB is exploring alternative data sources. These enhanced key fiscal balances, ensuring the
sources, such as insurance data, utility payments continuation of the IMF-EFF programme
and telecommunications payments, and and bolstering overall macroeconomic
e-commerce data are considered formal data stability. Accordingly, the primary balance,
sources for assessing reputational collateral. which excludes interest payments from the
Moreover, the enactment of the Secured overall deficit and reflects the discretionary
Transactions Act (STR Act), will create a secure component of fiscal policy, recorded a surplus of
transaction lending framework to mortgage 0.6 per cent of GDP (Rs.173.3 billion) in 2023,

69
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table Summary of Government Fiscal interest payments, the same in GDP terms
Operation

1
1.26 narrowed marginally. The overall budget deficit
Item 2022 2023 (a) 2023/2022 narrowed to 8.3 per cent of GDP (Rs. 2,282.3
Absolute
Change
%
Change
billion) in 2023, in comparison to 10.2 per
Rs. million cent of GDP (Rs. 2,460.0 billion) recorded in
Total Revenue and Grants 2,012,589 3,074,324 1,061,735 52.8 the preceding year. The initial estimate for the
Total Revenue 1,979,184 3,048,822 1,069,638 54.0
Tax Revenue 1,751,132 2,720,563 969,431 55.4 overall deficit was 7.9 per cent of GDP
Non Tax Revenue 228,052 328,259 100,207 43.9
Grants 33,405 25,502 (7,903) (23.7) (Rs. 2,404.0 billion).
Expenditure and Net Lending 4,472,556 5,356,591 884,035 19.8
Recurrent
Interest Payments
3,519,633
1,565,190
4,699,679 1,180,046
2,455,600 890,410
33.5
56.9
1.6.2 Government Revenue,
o/w Domestic
Foreign
1,436,569
128,621
2,332,208
123,391
895,639
(5,230)
62.3
(4.1)
Expenditure, and
Capital and Net Lending 952,923 656,912 (296,011) (31.1) Net Lending
o/w Public Investment 1,014,293 932,745 (81,548) (8.0)
Current Account Balance -1,540,448 -1,650,857
Primary Balance -894,777 173,332 Reflecting Government's commitment to
Overall Fiscal Balance -2,459,967 -2,282,267
Total Financing 2,459,967 2,282,267 (177,700) (7.2) fiscal consolidation, a substantial increase
Foreign Financing
Domestic Financing
424,822
2,035,145
494,655 69,833
1,787,612 (247,533)
16.4
(12.2)
in government revenue was recorded in
As a Percentage of GDP (b) both nominal terms and as a percentage
Total Revenue and Grants 8.4 11.1 of GDP in 2023, compared to 2022.
Total Revenue 8.2 11.0
Tax Revenue 7.3 9.8 Accordingly, in nominal terms government
Non Tax Revenue
Grants
0.9
0.1
1.2
0.1
revenue recorded a year-on-year growth of
Expenditure and Net Lending 18.6 19.4 54.0 per cent, while in GDP terms revenue
Recurrent 14.6 17.0
Interest Payments 6.5 8.9 increased by 2.8 percentage points to 11.0 per
o/w Domestic 6.0 8.4
Foreign 0.5 0.4 cent of GDP in 2023. Numerous tax reforms
Capital and Net Lending
o/w Public Investment
4.0
4.2
2.4
3.4
implemented in the second half of 2022 and
Current Account Balance -6.4 -6.0 in 2023 supported the expansion in revenue
Primary Balance -3.7 0.6
Overall Fiscal Balance -10.2 -8.3 collection. The significant rise in tax revenue
Total Financing 10.2 8.3
Foreign Financing 1.8 1.8 was mainly due to the increased collections
Domestic Financing 8.5 6.5
from income taxes, VAT, excise duties, import
(a) Provisional Source: Ministry of Finance,
(b) GDP estimates (base year 2015) released by Economic Stabilization and duties, and Special Commodity Levy (SCL). The
the Department of Census and Statistics on National Policies
15 March 2024 have been used. Social Security Contribution Levy (SSCL) that was
introduced in October 2022 also contributed
compared to the deficit of 3.7 per cent to this increase in government revenue. The
(Rs. 894.8 billion) recorded in 2022, significant increase in income taxes in 2023 was
overachieving the Quantitative Performance
Criteria (QPC) set under the IMF-EFF Figure Composition of Government
1.33 Revenue - 2023
arrangement. A primary surplus was recorded
last in 2018, and since 1950 the country has
registered a primary surplus only in six years. Income Taxes
29.9% Fees and
Charges
Maintaining a positive primary balance is crucial 4.8%
Non
for fostering fiscal sustainability and effectively VAT
22.8%
Tax
Revenue

controlling the accumulation of debt. In the 10.8% Profits and Dividends

2.5%

meantime, although the current account27 deficit Excise Duties

15.4%
Rent and Interest Income
1.1%

widened in nominal terms on account of higher

PAL
5.8% Other
Import Duties Tax Revenue 2.4%
3.4% 89.2%
Other Taxes
12.0%
27 The current account balance represents the difference between the total revenue and
Source: Ministry of Finance, Economic Stabilization and National Policies
the total recurrent expenditure.

70
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Figure
1.34 Government Revenue, Expenditure and Key Fiscal Balances

1
Government Revenue Government Expenditure
3,500 14
6,000 25
11.9 11.0 21.0 19.4
3,000 12 20.0
328 5,000 19.4 18.6 657
20
2,500 10
8.7 1,005
8.3 8.2 4,000 953
Rs. billion

Rs. billion
% of GDP
15

% of GDP
2,000 8
156 228
3,000 774 815
493
1,500 6 913
151 159 2,721 717 685 2,456 10
2,000 552 1,565
1,000 4
1,735 1,751 980 1,048
1,298 901 5
1,217 1,000
500 2
974 1,015 1,139 1,239
848
0 0 0 0
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 Pro.
Pro. Expenditure on Goods & Services Interest Payments
Tax Non Tax Total Revenue (RHS) Subsidies & Transfers Capital Expenditure & Net Lending
Total Expenditure & Net Lending (RHS)

Key Fiscal Balances (% of GDP)

Tax reforms implemented in the second half of
2019 2020 2021 2022 2023 Pro.
2022 and in 2023 resulted in a notable growth
0.6
in government revenue in 2023, while
rationalisation measures enabled the
Government to rein in expenditure to some
(3.4)(3.4)
(4.4)
(3.7) extent, despite the increased domestic interest
(5.7) (6.0) payments. Fiscal consolidation measures led to
(6.4)
(7.5) (7.3) a notable improvement in fiscal balances,
(8.3)
(9.0) especially with a primary surplus being record-
(10.2)
(10.7) ed after a five years period and for the sixth
(11.7)
time since 1950.
Current Account Balance Primary Balance Overall Fiscal Balance
Source: Ministry of Finance, Economic Stabilization and National Policies

achieved through key policy measures including year. Excise duty structures on liquor, cigarettes,
revisions to the personal income tax structure in petrol, and diesel were revised several times
terms of the tax-free threshold, tax rates, and tax during 2023 leading to the revenue collection
brackets, mandatory registration requirement from excise duties to increase from 1.4 per
for specific professionals under the Inland cent of GDP in 2022 to 1.7 per cent of GDP
Revenue Department (IRD), upward revision of in 2023. International trade related taxes,
the standard corporate income tax rate, and including import duties and SCL, exhibited a
the elimination of concessionary rates related to substantial year-on-year growth in nominal
corporate income taxes. Consequently, income terms due to upward revisions to the rates during
tax collection increased from 2.2 per cent of 2023. However, when measured in GDP terms,
the GDP in 2022 to 3.3 per cent of GDP in their increase was only marginal, constrained by
2023. Meanwhile, the incremental adjustment subdued imports due to restrictions on
of the VAT rate in two phases during 2022, non-urgent imports maintained during most
coupled with the downward revision to the VAT part of 2023, and reduced affordability. At the
registration threshold in the latter part of the same time, the collection from SSCL amounted
same year that widened the tax net related to to 0.8 per cent of GDP in 2023. Revenue from
VAT, contributed to the notable growth in VAT Ports and Airports Development Levy (PAL)
collection in 2023. Accordingly, VAT revenue and Cess levy experienced a decline during
collection increased to 2.5 per cent of GDP in the year under review due to the steps taken in
2023 from 1.9 per cent of GDP in the preceding 2023 to gradually phase out both para tariffs.

71
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Meanwhile, non-tax revenue also increased addition, overreliance on domestic financing

1
during 2023 both in nominal and real terms, due to the Government's limited access to
mainly driven by higher revenue collection from foreign financing also contributed to the rise in
sources such as fees and charges, as well as domestic interest cost. Interest cost accounted
profit and dividend transfers from State Owned for 80.5 per cent of the total government
Enterprises (SOEs). According to the initial revenue and 45.8 per cent of total government
budget estimates for 2023, total revenue was expenditure in 2023 compared to 79.1 per
projected to be 12.5 per cent of GDP, with tax cent and 35.0 per cent recorded in 2022,
revenue and non-tax revenue estimated at 11.3 respectively. Meanwhile, expenditure on pension
per cent and 1.2 per cent of GDP, respectively. payments rose considerably during 2023, with
Despite the notable improvement in revenue the increased retirements during the year due
collection in 2023 compared to the previous to revisions implemented in the preceding year
year, there was an underperformance of revenue in relation to reducing retirement age for public
relative to the initial ambitious budget estimates sector employees from 65 to 60. Further, free
for 2023. The realised revenue for 2023 medicine, and implementation of the Aswesuma
amounted to 88.4 per cent, with realised tax Welfare Benefit Scheme contributed for the
revenue standing at 86.9 per cent of the initial increase in subsidies and transfers. On the other
projections. This shortfall could be attributed to hand, salaries and wages declined marginally
faster deceleration in inflation than anticipated in in nominal terms as well as in GDP terms, as
the budget, continued subdued import demand, a result of freezing of new recruitments to the
exchange rate appreciation, and issues related public sector and sizeable retirements of public
to revenue administration. Tax measures such as servants from the workforce. Meanwhile, capital
the upward revisions to the income tax structure expenditure and net lending recorded a notable
have led to an increase in the share of direct decline both in nominal terms as well as GDP
tax collection, reaching 33.5 per cent in 2023 terms. This reduction was primarily attributed to
compared to 30.5 per cent in 2022. a significant decrease in net lending, caused by
the settlement of the on-lending facility provided
The total expenditure and net lending
to CPC in 2022 through the Indian Credit Line.
increased both in nominal terms and as a
Capital expenditure excluding the impact of
percentage of GDP, mainly driven by the
net lending as a percentage of GDP increased
substantial escalation in domestic interest
to 3.3 per cent in 2023 from 3.0 per cent in
expenditure, despite the notable reduction
2022. According to the initial budget estimates
in capital expenditure and net lending.
Accordingly, in nominal terms, government Figure Composition of Government
expenditure recorded a year-on-year growth of 1.35 Recurrent Expenditure - 2023
19.8 per cent, while in GDP terms expenditure Interest Payments
52.3%

increased only by 0.8 percentage points in Pensions

7.9%

2023. The significant nominal rise in domestic Transfers to Samurdhi

Households
1.9%
interest expenditure was influenced by elevated Transfers to
Public Institutions
19.4%
Fertiliser Subsidy
and Corporations 1.1%
domestic interest rates stemming from tight 2.0%

Other Goods Other

monetary conditions prevailed until June 2023 and Services
6.4%
8.5%

Salaries and Wages

and high risk premia attached to government 20.0%

securities amidst uncertainties over DDO. In Source: Ministry of Finance, Economic Stabilization and National Policies

72
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

for 2023, total expenditure was projected decreased to 2.5 per cent of GDP (Rs. 692.3

1
to be 21.2 per cent of GDP, with recurrent billion) in 2023, down from 6.0 per cent of GDP
expenditure and capital expenditure and net (Rs. 1,440.2 billion) in 2022. Net domestic
lending estimated at 16.8 per cent and 4.4 per financing from the banking sector experienced
cent of GDP, respectively. The Government's a significant contraction, with a net prepayment
efforts in curbing non-urgent and non-essential of 0.02 per cent of GDP (Rs. 6.4 billion).29 This
expenditure through the continuation of reduction was offset by non-bank sources, which
expenditure rationalisation measures kept total accounted for 6.5 per cent of GDP (Rs. 1,798.5
expenditure in check, preventing recurrent billion) in 2023. Meanwhile, the share of net
expenditure rising far above the budget foreign financing in total net financing increased
estimates, despite higher than expected domestic to 21.7 per cent in 2023, in comparison to
interest payments. 17.3 per cent in the preceding year. The net
foreign financing in 2023 includes gross funds
1.6.3 Financing the Budget Deficit received under the two tranches of the IMF-EFF
In 2023, the Government continued to rely facility, which was granted as budget support.
primarily on domestic sources to finance Additionally, notable receipts were received from
the budget deficit, largely due to existing other multilateral agencies such as ADB and
constraints in accessing international the International Development Association (IDA)
capital markets. Accordingly, net domestic of the World Bank. These funds were provided
financing accounted for 78.3 per cent of the in support of the Government's economic
total debt financing during the period under stabilisation programme and to support
review. Although this share has slightly reduced expenditure on social safety nets.
compared to the past two years, where it Sovereign rating agencies maintained their
exceeded 100 per cent in 2021, the current downgraded rating status for Sri Lanka due
percentage still remains relatively high in to the standstill on selected foreign debt
comparison to the 62.3 per cent and 57.5 per service payments. Accordingly, Fitch Ratings
cent recorded for 2019 and 2018, respectively, and S&P Global Ratings maintained the long
when similar restrictions were not in effect. Once term foreign currency Issuer Default Rating (IDR)
the impact of the transactions in relation to for Sri Lanka at RD (Restricted Default) and SD
the DDO operation is eliminated, the total net (Selective Default), respectively. Moody’s Ratings
domestic financing was predominantly sourced maintained the long term foreign currency issuer
through Treasury bills, reflecting a strong market credit rating at 'Ca' (Stable). In the meantime,
preference for short term instruments over long the announcement of the DDO operation
term instruments due to uncertainties and higher prompted the international sovereign credit
Treasury bill rates prevailed during the first rating agencies to downgrade the ratings of
half of the year.28 In 2023, net financing from local currency domestic debt of the Government,
Treasury bills amounted to 7.5 per cent of GDP while the same were upgraded with the
(Rs. 2,058.6 billion), up from 6.7 per cent of successful completion of the DDO operation.
GDP (Rs. 1,608.2 billion) recorded in 2022.
29 In contrast to the contraction recorded in net domestic financing from the banking
Conversely, net financing from Treasury bonds sector under this section, NCG figures given under the Monetary Sector Develop-
ments of this Chapter show an expansion. This discrepancy can be attributed to the
timing of recording the debt transfer associated with CPC's public guaranteed debt
to the central government debt stock which was accounted for in the banking sector
28 During the year, Sri Lanka Development Bonds and Central Bank Provisional Ad- records only in 2023, despite being transferred by end 2022 as per the records of
vances were settled as part of the DDO operation. Ministry of Finance.

73
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

1.6.4 Central Government Debt Government settled the outstanding stock of

1
and Public Debt 30 Rupee Loans, while the outstanding balance of
the government guaranteed foreign currency
Central government debt as a percentage debt stock of CPC, which was absorbed into
of GDP declined to 103.9 per cent by end central government debt by end December
2023 from 114.2 per cent in 2022, primarily 2022, remains unchanged by end of 2023.
due to the notable growth in nominal GDP Meanwhile, the decrease in foreign debt in
driven by high inflation and the impact nominal terms by end 2023 compared to
of currency appreciation on foreign debt. end 2022 was due to the appreciation of the
Accordingly, domestic debt and foreign debt as rupee against major foreign currencies. The
a percentage of GDP declined from 62.5 per parity related reduction of foreign debt in 2023
cent and 51.8 per cent, respectively, in 2022 to amounted to Rs.1,431.4 billion. However, the
61.7 per cent and 42.1 per cent, respectively, decline in the rupee value of the foreign debt
in 2023.31 However, nominal value of the total stock was partially offset by funds received
debt32 increased by 4.4 per cent driven solely from multilateral organisations, including the
by a rise in domestic debt, while outstanding two tranches of the IMF-EFF facility received
foreign debt, valued in domestic currency, in March and December 2023. In previous
decreased from the levels observed in 2022. IMF programmes, IMF financing was treated
The nominal increase in total domestic debt as a liability of the Central Bank. However,
reflects the substantial financing needs fulfilled in the latest arrangement, which focused on
from the domestic market amidst limited foreign providing budget support to the Government,
financing options. The share of medium and proceeds are transferred to the Government,
long term domestic debt as a percentage of total thereby being treated as a liability of the
domestic debt increased to 74.2 per cent by the Government, increasing the overall central
end of 2023 from 65.7 per cent at the end of government debt. As of end 2023, the relative
December 2022. This change was primarily due share of outstanding foreign debt of the central
to the conversion of the Central Bank's Treasury government decreased to 40.6 per cent of total
bill holding and provisional advances to the central government debt, compared to 45.3 per
Government into longer term Treasury bonds cent recorded at the end of 2022.
under the DDO operation, increasing the share The outstanding public debt33 decreased to
of medium to long term debt, thereby extending 110.8 per cent of GDP at end 2023 from
the maturity period of the debt stock, assist in 119.2 per cent of GDP at end 2022, in line
lowering the Gross Financing Needs (GFN) for
the Government. This is crucial in achieving 33 The outstanding public debt includes debt of the central government and public
guaranteed debt.

debt sustainability targets agreed with the IMF.

Figure
Furthermore, during the first half of 2023, the 1.36 Outstanding Central Government Debt
27,492 28,696 119
30 Government Debt Statistics are presented net of bank deposits of the Government. 27,000 115
114.2
111
Percentage of GDP

31 As per the guidelines of compiling government debt statistics in the Manual of 11,644
22,000 107
Government Finance Statistics 2014 of the IMF, non-resident holding of debt have 17,614
12,458
103.9 103
been classified as foreign debt while resident holdings of debt have been classified 17,000 15,117 99
Rs. billion

100.0
as domestic debt. 96.6
95
6,517
32 In the context of ongoing discussions on external debt restructuring, the outstanding 12,000 6,052 91
central government debt as at end 2022 and end 2023 excludes several debt service 15,034 17,052 87
payments that became overdue after 12 April 2022, the date on which the Interim 7,000 11,097 83
9,065 79
Policy regarding the servicing of Sri Lanka’s external public debt was announced by
2,000 75
the Ministry of Finance, Economic Stabilization, and National Policies. These debt 2020 2021 2022 2023 Pro.
service payments comprise overdue interest payments of affected debt, which are
deemed to be capitalised as per the Interim Policy. Further, the balance as at end Domestic Foreign Debt/ GDP (RHS)
December 2022 excludes the value of certain coupon payments in relation to Sri Sources: Ministry of Finance, Economic Stabilization and National Policies
Central Bank of Sri Lanka
Lanka Development Bonds that became overdue from April 2022 till end 2022.

74
 MACROECONOMIC DEVELOPMENTS AND CONDITIONS OF THE FINANCIAL SYSTEM

Table
Outstanding Government Debt (a) (b)

1
1.27

Rs. billion
Item 2022 2023 (c)
Domestic Debt (d) 15,033.9 17,051.9
By Maturity Period
Short Term (e) 4,267.7 3,616.2
Medium and Long Term (f) 9,882.1 12,646.9
Other Domestic (g) 884.1 788.7
By Institution (h)
Bank (h) 8,525.7 9,102.8
Non Bank (h) 6,164.0 7,506.3
Repurchase Transaction Allocations (i) (j) 344.1 442.7
Foreign Debt (k) (l) 12,458.2 11,644.1
Multilateral 3,611.6 3,817.0
Bilateral and Commercial 8,846.6 7,827.1
By Currency
SDR 1,604.7 1,737.1
US Dollars 8,716.9 7,943.9
Japanese Yen 979.6 819.4
Euro 417.4 396.6
Other 739.6 747.1
Total Outstanding Central Government Debt 27,492.0 28,695.9
Public Guaranteed Debt (m) (n) 1,180.7 1,931.3
Public Debt 28,672.7 30,627.3
As a percentage of GDP (o)
Total Outstanding Central Government Debt 114.2 103.9
Domestic Debt 62.5 61.7
Foreign Debt 51.8 42.1
Public Guaranteed Debt 4.9 7.0
Public Debt 119.2 110.8

Sources: Ministry of Finance, Economic Stabilization and National Policies

Central Bank of Sri Lanka
(a) As per the guidelines of compiling government debt statistics in the Manual of Government Finance Statistics 2014 of the IMF, non resident holdings of outstanding SLDBs have been
classified under foreign debt and resident holdings of outstanding ISBs of the Sri Lankan Government have been classified under domestic debt. Further, debt statistics are presented
on net basis (net of deposits).
(b) The outstanding central government debt as at end 2022 and end 2023 excludes several debt service payments that became overdue after 12 April 2022, the date on which the
Interim Policy regarding the servicing of Sri Lanka’s external public debt was announced by the Ministry of Finance, Economic Stabilization and National Policies. These debt service
payments comprise of overdue interest payments of affected debt which are deemed to be capitalised as per the Interim Policy. Further, the balance as at end December 2022
excludes the value of certain coupon payments pending settlement in relation to Sri Lanka Development Bonds that became overdue from April 2022 till end 2022.
(c) Provisional
(d) From 2023 onwards, domestic debt compilation method was changed and is based on the data confirmed by the Ministry of Finance, Economic Stabilization and National
Polices.
(e) Excludes Treasury bills held by non resident investors
(f) Excludes Treasury bonds held by non resident investors
(g) Data from 2022 includes outstanding balance of the government guaranteed foreign currency debt of the Ceylon Petroleum Corporation that was absorbed into central government
debt.
(h) Institution wise classification was revised from Annual report 2022 based on the records of the Central Depository System
(i) Includes security holdings under Repurchase agreements for which absolute ownership could not be established
(j) Holdings under repurchase transactions with respect to Open Market Operations, have been allocated to the respective Licensed Commercial Bank or Standalone Primary
Dealer
(k) Foreign loan debt statistics and classification of foreign debt for 2022 and 2023 are prepared based on the data sourced from the Commonwealth Secretariat Debt Recording and
Management System (CS-DRMS) maintained by the Ministry of Finance, Economic Stabilization and National Policies, and extracted on 09 March 2023, 10 March 2023 and 26
February 2024.
(l) From December 2022 onwards, several outstanding project loans which were previously classified under Ceylon Electricity Board, Airport and Aviation Services Ltd. and Sri Lanka
Ports Authority were absorbed into central government debt.
(m) Compilation of public guaranteed debt is based on data received from the Ministry of Finance, Economic Stabilization and National Policies as of 29 February 2024.
(n) Includes an international bond amounting to US dollars 175 million issued by the SriLankan Airlines in June 2014. This was matured in June 2019 and re-issued for a period of 5
years.
(o) GDP estimates (base year 2015) released by the Department of Census ad Statistics on 15 March 2024 have been used.

75
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

with the reduction in central government efforts in negotiating with private debt holders to

1
debt in GDP terms. In absolute terms, the total restructure external commercial debt, complying
outstanding public debt increased to with comparability of treatment and the agreed
Rs. 30,627.3 billion at end 2023 from debt sustainability targets.
Rs. 28,672.7 billion at end of 2022, which was
an increase of 6.8 per cent, year-on-year. 1.6.5 Central Government Debt
Service Payments
The Government successfully implemented
the DDO operation in 2023 with the aim The total debt service payments increased
of achieving debt sustainability alongside to 15.4 per cent of GDP in 2023 from 12.5
other measures in this regard. Accordingly, per cent of GDP in 2022, mainly driven by
eligible Sri Lanka Development Bonds the increased domestic interest payments.
(SLDBs) holdings were converted into five new Domestic debt services rose to 13.7 per cent
variable coupon Sri Lanka rupee denominated of GDP in 2023 compared to 10.4 per cent in
Treasury bonds while Treasury bonds held by 2022, marking a nominal increase of
Superannuation Funds were converted into Rs. 1,283.1 billion. At the same time, the rise in
new Treasury bonds featuring medium to long domestic amortisation payments was associated
term maturities. Furthermore, outstanding with increased settlement of Treasury bonds,
Treasury bill holdings of the Central Bank and an increase of Rs. 468.7 billion during 2023
outstanding provisional advances from the compared to 2022. In comparison, a decrease
Central Bank to the Government were converted in foreign debt service payments to 1.7 per cent
into ten new step down fixed coupon Treasury of GDP in 2023 from 2.0 per cent of GDP in
bonds and into twelve existing Treasury bills. 2022 was recorded due to continued suspension
The successful implementation of the DDO of certain foreign debt commitments following
operation has led to the conversion of short the Government’s debt standstill announcement
term debt maturities into medium to long term in 2022.
maturities, thereby mitigating refinancing risk
while lengthening the average time to maturity Figure Central Government Debt Service
1.37 Payments (As a Percentage of GDP)
of the domestic debt portfolio. Spreading 18
repayment obligations over an extended 16 15.4

period alleviates immediate financial pressures 14 13.5

12.4 12.5
and facilitates the establishment of a more 12 11.0

manageable and sustainable debt structure.

Per cent

10
8.7
Meanwhile, the Government is actively engaging 8
8.3 8.2

with external creditors to negotiate relief on 6

4
external debt. Accordingly, an Agreement
2
in Principle (AIP) has been reached with the 0
Official Creditors Committee (OCC) and China 2020 2021 2022 2023 Pro.
Foreign Interest Payments Foreign Amortisation Payments
EXIM Bank, leading to the current process of Domestic Interest Payments Domestic Amortisation Payments
Government Revenue Total Debt Service Payments
signing a Memorandum of Understanding Sources: Ministry of Finance, Economic Stabilization and National Policies
(MOU). The Government also continues its Central Bank of Sri Lanka

76
 Chapter 2
REVIEW OF CENTRAL BANK POLICIES

Summary
The Central Bank’s mandate of achieving and maintaining domestic price stability and
securing financial stability is reinforced by the Central Bank of Sri Lanka Act No. 16 of 2023
(CBA) that came into effect in September 2023. CBA stipulates price stability as the prime
objective of the Central Bank and financial stability as the other objective. It recognises Flexible
Inflation Targeting (FIT) as the monetary policy framework supported by a flexible exchange rate
regime. Moreover, the Central Bank has been designated as the macroprudential authority. CBA
was enacted amidst a myriad of economic challenges that emerged with the severe economic
crisis in the country in 2022. The crisis response and prudent policy measures implemented by
the Central Bank and the Government, supported by the IMF-EFF programme, helped restore
macroeconomic stability to a great extent in 2023. On the monetary front, in view of benevolent
inflation developments and improvements in the external sector, there was a shift from a
tight monetary policy stance to an accommodative stance since June 2023. The imposition
of interest rate caps on selected lending products, effective monetary policy communication
amidst uncertainty, and measures taken to improve liquidity conditions in the market resulted
in accelerated monetary policy transmission and a notable downward adjustment in market
interest rates by end 2023. Showing signs of spillover of easing monetary conditions to the real
economy, a reversal of the trend of private sector credit contraction was observed since June
2023. On the external front, the Central Bank, having discontinued the daily guidance given to
the market since mid-2022, allowed greater flexibility in the determination of the exchange rate
in March 2023. In line with improved foreign exchange liquidity in the market, the exchange
rate was allowed to be determined by market forces thereafter. Intervention by the Central
Bank in the domestic foreign exchange market was only aimed at preventing any unwarranted
excessive volatility and accumulating Gross Official Reserves (GOR). Reflecting the improved
external sector position and the return of confidence, the Sri Lanka rupee appreciated, while
GOR improved notably. In the meantime, the majority of the administrative controls that the
Central Bank and the Government had put in place during the foreign exchange crunch were
progressively loosened in 2023. In the financial sector, prudential regulatory measures and
crisis-preparedness of the Central Bank enabled financial institutions to weather the impact of
economic turmoil, thus safeguarding domestic financial system stability. During 2023, an Asset
Quality Review (AQR) was completed for nine key banks to identify structural weaknesses in
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

the banking sector and build resilience. Meanwhile, frameworks and methodologies are being
prepared along with strengthening interorganisational coordination for the Central Bank to
effectively play the role of the macroprudential authority of the country. Complying with the
requirements under CBA, the promotion of financial inclusion in Sri Lanka emerged as a policy
priority of the Central Bank pertaining to regional development. Further, the Central Bank forged
ahead with promoting digital payments and e-money services, while actively facilitating cross
border transactions. Regulations enabling the Central Bank to start market conduct monitoring

2
were released in order to guarantee effective financial consumer protection. Meanwhile, the
Sri Lanka Deposit Insurance Scheme was strengthened through a financing mechanism offered
by the World Bank, while backstop funding arrangements were established with the Ministry
of Finance.

2.1 Monetary Policy Framework of the Central Bank shall submit a report to the
Parliament, which shall also be made available
The Central Bank’s mandate of maintaining to the public. The report will set out the reasons
domestic price stability is reinforced by the for the failure to achieve the inflation target,
newly enacted Central Bank of Sri Lanka the remedial actions proposed to be taken by
Act, No. 16 of 2023 (CBA) in September the Central Bank, and an estimate of the time
2023. CBA stipulates achieving and maintaining period within which the inflation target shall be
domestic price stability as the primary objective achieved. Meanwhile, CBA allows increased
of the Central Bank. CBA formally recognises operational and financial independence to the
Flexible Inflation Targeting (FIT) as the monetary Central Bank, thereby strengthening policies
policy framework and requires the signing of a targeted at fulfilling its mandate effectively.
monetary policy framework agreement by the Accordingly, monetary financing of the budget
Minister of Finance and the Central Bank, setting deficit is prohibited with the exception of
out the inflation target to be achieved. Although circumstances specified by the CBA. Limits were
the Central Bank gradually moved towards FIT also introduced on provisional advances to
as its monetary policy framework over time, finance government expenditure. The provisions
the legislative enactments required to formally in CBA would help ensure that inflation in Sri
adopt FIT as the monetary policy framework Lanka would be maintained at low and stable
came into effect only with the enactment of levels in the period ahead, while ensuring that
CBA. Accordingly, the Central Bank entered into inflation expectations remain well anchored,
an agreement with the Minister of Finance in thereby benefiting all stakeholders of the
October 2023 to maintain headline inflation at economy. Meanwhile, CBA provides for the
a target of 5 per cent.1 The target for inflation coordination of fiscal, monetary, and financial
is to be reviewed every three years, or before stability policies through the establishment of
that if exceptional circumstances warrant it. CBA the Coordination Council, where the Governor
includes provisions for enhanced transparency of the Central Bank, who also acts as the
and public accountability by the Central Bank. Chairperson, and the Secretaries to the Treasury
Accordingly, if the Central Bank fails to meet and the Ministry of the Minister assigned the
the inflation target,2 the Monetary Policy Board subject of Economic Policy3 serve as members.

1 Communicated to the public under the Extraordinary Gazette Notification No. 3 In the event that such subject is assigned to a Minister other than the Minister of
2352/20 dated October 5, 2023. Finance.
2 If quarterly average (year-on-year) headline inflation (CCPI-based) misses the target
rate by a margin of ±2 percentage points for two consecutive quarters.

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 REVIEW OF CENTRAL BANK POLICIES

The Coordination Council meets quarterly to adjustment in overall market lending interest
exchange views on recent macroeconomic rates, caps on interest rates of selected lending
developments, outlook, and risks. products were imposed by the Central Bank
in late August 2023, forcing a reduction in
2.2 Monetary Policy Stance and excessive interest rates of those products in line
Measures with the accommodative monetary policy stance.

2
In order to induce a downward adjustment in
The Central Bank’s monetary policy stance
overall market interest rates on rupee loans
in 2023 saw a gradual transition from the
and advances, broader guidelines were issued
significant tightening of monetary policy in
for banks requiring lending interest rates to be
2022 to an accommodative stance in the
reduced by at least 350 basis points by end
latter half of 2023. The notable moderation
2023 compared to the levels that prevailed at
of inflation and well anchored inflation
end July 2023. These measures were reinforced
expectations, subpar economic activity amidst
in frequent dialogue with the banking sector
subdued domestic demand conditions, and the
to ensure that overall market lending interest
easing of external sector pressures paved the
rates declined to levels consistent with the policy
way for the Central Bank to pursue a relaxed
interest rates. In March 2024, measures were
monetary policy stance during the year. As
taken to loosen monetary policy further by
inflation peaked in September 2022, in line
way of reducing the policy interest rates by 50
with the anticipated disinflation trajectory,
basis points, which is expected to support credit
the Central Bank initiated moral suasion to
growth and revival of economic activity through
reduce interest rates from their peak levels in
the expected further reduction in market lending
late 2022. Despite the gradual moderation
interest rates in the backdrop of low inflation.
of excessive market interest rates from late
2022, the Central Bank was compelled to Measures were taken to improve liquidity
raise policy interest rates, i.e., the Standing conditions in the domestic money market
Deposit Facility Rate (SDFR) and the Standing in 2023. Overall liquidity in the domestic
Lending Facility Rate (SLFR) by 100 basis points money market remained largely at deficit levels
in early March 2023 to fulfil the ‘prior action’ during the period leading up to August 2023,
that was required to be met to finalise the which is expected to have hindered the effective
International Monetary Fund - Extended Fund transmission of monetary policy easing measures
Facility (IMF-EFF) arrangement. However, the to market interest rates. Accordingly, in line
magnitude of this increase was notably below with the easing of the monetary policy stance,
the level of adjustment envisioned in the initial the Central Bank implemented several policy
round of negotiations. Despite this increase measures to address the persistent liquidity deficit
in policy interest rates, active communication in the domestic money market. Consequently,
by the Central Bank alleviated the impact of the Statutory Reserve Ratio (SRR) applicable to
such increase on market interest rates. Upon licensed commercial banks (LCBs) was reduced
observing signs of a sustained moderation of to 2.00 per cent from 4.00 per cent with effect
inflation, the Central Bank commenced easing from 16 August 2023, which released around
monetary policy in early June 2023, and policy Rs. 200 billion of liquidity to the domestic money
interest rates were reduced by a total of 650 market. Further, the Central Bank provided
basis points over four occasions during the year. special liquidity assistance facilities with a view
Considering the somewhat sluggish downward to improving the liquidity positions of stressed

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

licensed banks. Furthermore, as a precaution, interest rate closely monitored by the Central
the Central Bank strengthened its Emergency Bank as the operating target to guide the
Liquidity Assistance (ELA) Framework enabling it market interest rates under the FIT framework,
to provide funds to licensed banks in the event of declined towards the lower bound of the
any imminent financial panic. The Central Bank Standing Rate Corridor (SRC) during 2023. With
also conducted active open market operations these developments and the finalisation of the
(OMOs) injecting liquidity on a term basis Domestic Debt Optimisation (DDO) operation

2
through term reverse repo auctions as needed in and the associated decline in risk premia, yields
addition to the overnight reverse repo auctions. on government securities declined significantly
Moreover, with a view to injecting liquidity on a during the year paving the way for the notable
permanent basis, auctions for outright purchase reduction in overall market interest rates. As a
of Treasury bonds were conducted in 2023, result, the interest rate structure of the economy
which followed into the first few weeks of 2024. normalised with retail market lending rates
Measures were also taken to reactivate reducing to levels supporting some expansion
the money markets by reducing LCBs’ of credit to the private sector. Accordingly,
overreliance on the overnight funding credit to the private sector, which suffered
facilities of the Central Bank. With effect from continued contractions since mid-2022, marked
16 January 2023, restrictions were imposed a turnaround from June 2023, recording an
on the accessibility of the standing facilities to expansion of credit on a monthly basis until
LCBs. Accordingly, the usage of the Standing the end of the year supporting the recovery
Deposit Facility (SDF) was limited to a maximum of domestic economic activity. Despite the
of five (05) times per calendar month, while recovery, credit to the private sector recorded a
the Standing Lending Facility (SLF) was limited contraction of 0.6 per cent, year-on-year, by end
to 90 per cent of SRR of each LCB on any 2023, as credit declined significantly during the
given day. These restrictions prompted licensed period from January to May 2023. Meanwhile,
banks to explore alternative options for liquidity credit granted by the banking system to the
management. As a result, a reactivation in public sector comprising the Government and
domestic money market activity was observed, State Owned Business Enterprises (SOBEs) also
while LCBs reduced their reliance on Central witnessed a contraction in 2023. The Central
Bank facilities. In view of the improvements Bank's policy on monetary financing underwent
observed in the money markets, steps were a complete overhaul with the enactment of CBA.
taken to ease restrictions on the usage of the Despite the transitional provisions allowing for
standing facilities gradually, where the restriction monetary financing to continue for 18 months
on SLF was removed, while the restriction on from the enactment of CBA, the Central Bank
SDF was initially relaxed to ten (10) times during phased out the outstanding Net Credit to the
a calendar month with effect from the reserve
Government (NCG) by reducing its holdings of
maintenance period from mid-February 2024
government securities, which is also in line with
and a policy decision was taken to remove it
the IMF-EFF arrangement. With the gradual
completely with effect from April 2024.
unwinding of the Central Bank’s holdings of
Supported by the aforesaid monetary policy government securities and the reduction in
measures and operations, market interest funds obtained by LCBs and Primary Dealers
rates eased, and overall credit conditions (PDs) from the SLF owing to improvements in
improved in 2023. The Average Weighted Call domestic money market liquidity and restrictions
Money Rate (AWCMR), which is the short term on the usage of SLF, NCG by the Central Bank

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contracted in 2023. At the same time, to build order to guide the stakeholders of the economy
up the Gross Official Reserves (GOR), the about the anticipated developments of inflation,
Central Bank’s purchases of foreign exchange thereby helping the anchoring of medium term
from the domestic foreign exchange market inflation expectations. This approach marked
contributed to enhancing the Net Foreign Assets an important development in the monetary
(NFA) of the Central Bank. policy communication strategy of the Central
Bank, consistent with the FIT framework, where

2
The monetary policy communication
forward-looking information plays a major role.
strategy of the Central Bank during 2023 Meanwhile, the Governor and senior officials
was focused on the continuation of the of the Central Bank participated in various
disinflation process, reduction of market events and programmes to raise awareness
interest rates in line with the reduced on monetary policy. Simultaneously, regular
risk premia following the DDO operation publications of the Central Bank, including
and effecting a faster transmission of the the Annual Report, were completed in a timely
accommodative monetary policy stance manner. The publication of the first Monetary
during the second half of the year. During Policy Report (MPR) of the Central Bank in July
the first half of 2023, the Central Bank’s 2023 marked an important step in the monetary
communication strategy focused on ensuring policy communication strategy of the Central
the continuation of the disinflation process Bank. The main aim of this publication is to
by anchoring inflation expectations and communicate the rationale for the monetary
persuading financial institutions to reduce the policy decisions taken during the relevant
large spread between market interest rates and period, thereby contributing to enhancing the
policy interest rates, which was caused by the accountability of monetary policymaking of the
substantial premium that persisted on yields on Central Bank. In addition, MPR serves a key
government securities amidst the uncertainties purpose in the FIT framework by providing an
associated with the DDO operation. During important means of communicating anticipated
the second half of the year, the Central Bank’s developments of key macroeconomic variables,
communication was focused on expediting thereby helping the stakeholders of the economy
the transmission of accommodative monetary to make informed economic decisions,
policy for the benefit of the masses. A mix of incorporating forward-looking information. As
conventional channels and social media was per the statutory requirement in CBA, the Central
used by the Central Bank to enhance monetary Bank is required to publish the MPR
policy communication during the year. Monetary bi-annually, and accordingly, the first MPR as a
policy announcements were communicated statutory publication was published in February
via press releases in all three languages, and 2024. Along with the publication of this MPR,
they were complemented by press conferences short non-technical video clips highlighting the
chaired by the Governor of the Central Bank. key messages of the publication were made
These press conferences were livestreamed via available via the Central Bank’s social media
social media, and important messages were channels with the aim of improving the reach of
made available on the Central Bank’s social the content of the Report to a wider audience. In
media channels as short video snippets. The addition, the releases of the two MPRs were also
practice of publishing the inflation fan chart complemented by separate technical awareness
in the press releases on monetary policy and sessions for journalists, and the academia
inflation was continued throughout the year, in and professionals. Effective monetary policy

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

communication helps in anchoring inflation 2022. Due to this instability, the Central Bank
expectations, enhancing policy transmission, commenced providing daily market guidance
and reducing uncertainty, all of which are to the interbank foreign exchange market from
essential for achieving the Central Bank’s prime 13 May 2022 onwards that helped stabilise the
objective of maintaining domestic price stability. exchange rate from significant intraday volatility.
Moreover, clear communication enhances the This was implemented by publishing a middle
credibility and effectiveness of monetary policy, spot exchange rate and a variation margin on

2
contributing to economic stability and resilience. either side (+/-) of the middle spot exchange
Accordingly, among other factors, the efforts of rate on a daily basis. The margin varied in a
the Central Bank during 2023 to enhance the range of Rs. 1.00 – Rs. 10.00 and was set either
effectiveness of monetary policy communication symmetrically or asymmetrically on the middle
contributed to the disinflation process, reduction spot exchange rate from time to time. With
in risk premia in market interest rates, and faster these measures, greater stability of the exchange
transmission of the accommodative monetary rate was observed during the period reflecting
policy stance to the financial sector and the real the effectiveness of this policy. With a view to
economy. encouraging activity in the domestic foreign
exchange market and restoring a market-driven
2.3 External Sector Policies exchange rate in line with its FIT framework, the
Central Bank commenced a gradual relaxation
2.3.1 Exchange Rate Policy of the daily variation band, while loosening the
mandatory sales requirement. By early March
Sri Lanka followed a flexible exchange
2023, the daily guidance given to the market
rate regime during most of 2023. The
was discontinued while the policies relating to
Central Bank allowed greater flexibility in the
forex conversions implemented in 2022, such as
determination of exchange rate with effect
the mandatory requirement imposed on licensed
from 07 March 2023 by discontinuing the
banks (to sell foreign exchange to the Central
daily guidance given to the market since May
Bank on a weekly basis) on account of converted
2022, considering the improvement in the
inward workers’ remittances and service
liquidity in the domestic foreign exchange
sector related export receipts and the residual
market. Accordingly, the exchange rate was
value of converted export proceeds of goods,
allowed to be determined based on the demand
were revoked in March 2023. Accordingly,
and supply conditions in the domestic foreign
the liquidity conditions and sentiments in the
exchange market only with limited interventions
domestic foreign exchange market improved
by the Central Bank aimed at preventing any
notably. Moreover, operating instructions issued
excessive volatility in the exchange rate and
in 2020 to licensed commercial banks on the
accumulating GOR through purchases of
Inward Investments Swaps (IIS) Scheme were
foreign exchange from the market. Previously,
also revoked in 2023. The above measures
during 2021 and in early 2022, the Sri Lanka
helped improve foreign exchange liquidity
rupee was maintained at stable levels before
conditions as well as market sentiments leading
being allowed a measured adjustment in the
to appreciation of the Sri Lanka rupee in 2023.
exchange rate in early March 2022. However,
the outcome of this adjustment fell short of The enactment of CBA reiterated the
expectations due to the large overshooting of importance of a flexible exchange rate
the exchange rate. Accordingly, the Sri Lanka regime to complement the FIT framework.
rupee depreciated significantly by end April According to CBA, the Central Bank is charged

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with the implementation of a flexible exchange the Central Bank itself implemented several
rate regime in line with the FIT framework in measures to limit foreign exchange outflows
order to achieve and maintain domestic price from the country, while encouraging more
stability. A flexible exchange rate regime is also inflows. Most of such exchange restrictions and
expected to foster a deeper and more liquid other limitations were eliminated in 2023 in line
foreign exchange market. With the adoption with the gradual improvement in the liquidity
of the flexible exchange rate policy mandated conditions in the domestic foreign exchange

2
by CBA, the anti-export bias that prevailed in market and in view of improving the external
the past through an overvalued currency would sector outlook on multiple fronts. In May
be eliminated in the future and the exchange 2023, the unremunerated cash margin deposit
rate would move in line with the demand for requirement imposed a year earlier on imports
and supply of foreign exchange in the domestic of certain items on payment terms of Letters
foreign exchange market. With the adoption of Credit (LC), Documents against Payment
of the flexible exchange rate policy, the market (DP), and Documents against Acceptance (DA)
confidence improved notably, resulting in were removed. Other such restrictions that
significant net inflows to the domestic foreign were withdrawn include the rationing of foreign
exchange market. Consequently, the exchange exchange by the Central Bank and the Central
rate appreciated against the US dollar by 12.1 Bank’s informal guidance to authorised dealers
per cent in 2023 and by 7.6 per cent by end to prioritise access to foreign exchange for
March 2024 in line with market fundamentals. the imports of essential items. The Minister of
These developments enabled the Central Bank Finance and the Central Bank issued necessary
to purchase, on a net basis (based on value regulations and directions under the provisions
date), US dollars 1.7 billion in 2023 and around of the Foreign Exchange Act (FEA) No. 12
US dollars 1.1 billion during the first quarter of 2017 for the purpose of removing certain
of 2024. Further, this policy will safeguard the restrictions on the conversion of Sri Lanka
country from the extreme impacts of external rupees into foreign exchange for certain current
shocks to Sri Lanka, since the exchange rate international transactions and for removing
will be allowed to adjust in response to shocks, certain limits on the repatriation of proceeds
thus external sector stability will be restored derived from current transactions by emigrants.
eventually through the Balance of Payments The previous regulations that were in place
(BOP) adjustments. under the repealed Exchange Control Act No.
24 of 1953 on mandatory requirement to
2.3.2 Exchange Restrictions and repatriate goods export proceeds were reissued,
Capital Flow Management under FEA in October 2019. In February 2021,
Measures (CFMs) the mandatory conversion requirement on such
repatriated export proceeds was introduced. In
Most administrative measures introduced
addition to goods exports, proceeds of services
at the time of the foreign exchange crunch
exports were also included in the requirement
were gradually relaxed in 2023. During
of repatriation and mandatory conversion of
the time preceding and during the economic
export proceeds in October 2021. However, the
crisis in 2021 and 2022, the Government, in
conversion requirement in relation to services
consultation with the Central Bank, imposed
export proceeds was removed in August 2022.
a number of exchange restrictions and capital
flow management measures to overcome the Certain suspensions and limitations on
severe shortage of foreign exchange in the capital transactions imposed as CFMs were
domestic foreign exchange market. In addition, also relaxed during 2023. During the crisis

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period, several CFMs were rolled out by the of marine fuel (bunker), transport and logistics.
Government and the Central Bank to discourage Moreover, the automated export proceeds
the outflows of foreign exchange in order to monitoring system which was implemented in
support BOP conditions in the country. Once June 2022 was further improved during the
BOP conditions started to improve, some of year to give access for selected exporters to
the previously imposed CFMs were gradually reconcile their exports with remittances as an
avenue to strengthening the monitoring of the

2
relaxed. Accordingly, the temporary suspension
of payments made through Outward Investment repatriation of export proceeds to the country.
Accounts (OIAs) for the purpose of making In addition, measures such as (i) unremunerated
overseas investments by persons resident in cash margin deposit requirement on imports of
Sri Lanka was relaxed up to a certain level. certain items made under payments terms of LC,
However, limitations on making payments DA and DP payment terms; (ii) the use of the
through OIAs for selected capital transactions weekly volume weighted average rate for Central
continue to remain. In addition, limitations on Bank’s foreign exchange sales in bilateral
outward remittances for capital transactions non-request for quote outright spot transactions
made via Business Foreign Currency Accounts with authorised dealers; (iii) providing an
(BFCAs) held by persons resident in Sri Lanka incentive for inward workers’ remittances such
were also further relaxed. However, temporary as the reimbursement of transaction cost of
restrictions imposed on outward remittances for workers’ remittances that result in a more
capital transactions made via Personal Foreign favourable effective exchange rate for such
Currency Accounts (PFCAs) held by persons transactions, which were identified by the IMF as
resident in Sri Lanka continue. In addition, multiple currency practices, were eliminated in
limitations on the transfer of funds outside 2023.
Sri Lanka by emigrants under the migration
allowance were further relaxed. The Government
2.3.3 Relaxation of Import
and the Central Bank have formulated a plan for
Restrictions
the phased removal of remaining CFMs, subject The Government removed import
to reaching some milestones in the external restrictions in 2023, on the broad
sector conditions. recommendation from the Central Bank to
effect relaxation on a priority basis, apart
In addition, the Central Bank introduced
from restrictions on vehicle imports. The
further policy measures during the
Central Bank recommended to the Ministry of
year considering current and expected
Finance in May 2023 to relax the restrictions
developments in the domestic foreign
on imports of temporarily suspended items,
exchange market. As a measure for
except personal motor vehicles after careful
encouraging foreign exchange inflows into the
consideration of the improvements observed in
country, authorised dealers were permitted to
the domestic foreign exchange market and the
open and maintain Special Foreign Currency
gradual buildup of GOR, while also considering
Accounts (SFCA) – Investee, for companies
the dampening impact of continued import
in Sri Lanka, out of the proceeds received as restrictions on economic activity. Accordingly,
equity. Directions were also issued in relation restrictions on imports of temporarily suspended
to the BFCAs and accommodations to BFCAs, items were removed in three stages in June, July,
broadening certain foreign currency transactions and October 2023, keeping only motor vehicles
between the entities engaged in the business under temporary suspension. The restrictions

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on imports under certain payment terms that the financial system and control the risk of failure
were imposed in May 2022, mainly on open of individual systemically important institutions.
account terms, were continued throughout The Central Bank, as the macroprudential
2023. However, the requirement to obtain prior authority, is vested with powers, amongst
approval from LCBs for imports under DA and other things, to monitor, identify or assess
DP terms was removed by the end of February the buildup of risks and vulnerabilities in the
2024. These relaxations, together with the financial system; request, collect, compile,

2
easing of import restrictions by the Government analyse or publish data, information and
from mid-2023, resulted in a gradual increase statistics in order to achieve the macroprudential
in imports that supported the revival of economic objectives; conduct stress testing and simulation
activities and a reduction in price levels of import exercises; designate systemically important
items. financial sector participants; adopt and apply
the macroprudential instruments to financial
The above policy measures adopted in 2023
institutions regulated and supervised by the
helped the external sector achieve greater
Central Bank; formulate strategies and policies
stability during the year. These market-driven
to mitigate or address identified systemic risks;
policy measures encouraged more foreign
identify gaps in regulation that could pose
exchange inflows to the country and as a result,
systemic risks. Furthermore, the Act outlines
the liquidity conditions and market sentiments in
provisions for the establishment of the Financial
the domestic foreign exchange market improved
System Oversight Committee (FSOC) to
notably, leading to a sharp appreciation of the
contribute to securing the stability of the financial
Sri Lanka rupee. These conditions enabled the
Central Bank to buildup international reserves system in line with the macroprudential policy by
substantially during the year by purchasing forex bringing aspects of the sector that are not under
from the domestic market. the direct supervision or regulation of the Central
Bank and ensuring a coordinated approach in
2.4 Financial Sector Policy policy recommendations. In addition to the suite
Measures of quantitative and qualitative macroprudential
instruments identified by CBA, novel instruments
2.4.1 Designation of the and measures may be adopted as necessary to
Macroprudential Authority safeguard the resilience of the financial system.

CBA designates the Central Bank as the During 2023, the Central Bank continued
Macroprudential Authority in Sri Lanka. to develop its macroprudential instruments
The Act empowers the Central Bank with a to be implemented as part of broad policy
mandate to exercise, perform and discharge actions to mitigate or eliminate systemic
powers, duties, and functions in pursuing the risks. Accordingly, the Central Bank has
macroprudential objectives to achieve financial developed methodologies and frameworks to
stability. Three intermediate macroprudential introduce a Debt-Service-to-Income (DSTI) ratio
objectives are articulated in the Act as for the household sector; caps on Loan to Value
maintaining the resilience of the financial system (LTV) for credit facilities for housing purposes
in a manner that supports the provision of and the Counter Cyclical Capital Buffer (CCyB).
financial services even under adverse economic The DSTI and LTV, which are borrower based
and financial conditions; containing risks from macroprudential instruments, are envisaged to
unsustainable increases in credit and leverage; curb excessive credit demand and to mitigate
containing risks from interconnectedness within the buildup of systemic risks while curtailing

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

potential credit losses of banks and minimising to be incurred by the bank. Amendments were
the risks associated with excessive indebtedness. subsequently made requiring Licensed Banks to
The CCyB aims to address the procyclicality refrain from increasing management allowances
in the financial system, thereby shielding the of Chief Executive Officers (CEO), Key
banking sector from excessive credit growth Management Personnel (KMP), and payments
during the upswings in the cycle and facilitating to BODs, unless the increase is recommended
the supply of credit to the economy during by the Human Resource and Remuneration

2
a downturn. The Central Bank will vigilantly Committee and approved by BOD, subject to
monitor macrofinancial developments to the considerations stipulated therein.
implement macroprudential instruments
designed and calibrated in 2023 when required Several microprudential measures were also
to address systemic imbalance to enhance the targeted at addressing issues pertaining
resilience of the financial system. to the liquidity conditions of banks. To
proactively address probable liquidity constraints
2.4.2 Policies Related to Licensed and their impact on the stability of individual
Banks banks and the overall financial sector, a Banking
Act Determination was issued determining
During 2023, the Central Bank continued to qualifying non-financial corporate debt securities
introduce policy measures and regulations and qualifying non-financial common equity
to strengthen financial and operational shares, as defined in the Banking Act Directions
resilience, thereby ensuring the safety and on the Liquidity Coverage Ratio under Basel III
soundness of the banking sector. Banking liquidity standards, to be treated as liquid assets
Act Directions on Restrictions on discretionary in the computation of the Statutory Liquid Asset
payments of Licensed Banks were introduced Ratio of Licensed Banks.
to mitigate the possible adverse impact on
liquidity and capital position of Licensed Banks Amendments were made to the Banking
stemming from macroeconomic conditions that Act Direction on ‘Regulatory Framework
prevailed at the time, while seeking to ensure the on Technology Risk Management and
maintenance of appropriate levels of liquidity Resilience for Licensed Banks’ during
and capital. As per these directions, Licensed the year with the aim of enhancing
Banks were required to defer payments of cash the information security and resilience
dividends and profit repatriation for 2023 requirements for critical information
until the completion of the external audit of systems while establishing a higher risk
financial statements/interim financial statements management measure for the banking
for 2023. Further, Licensed Banks were also sector. The amendments were pertinent to the
required to refrain from engaging in share identification of critical information systems,
buybacks, increasing management allowances, requirements related to the recognition of
and payments to Boards of Directors (BOD), third party service providers, frequency of user
and incurring non-essential and/or non-urgent access privilege reviews, criteria for determining
expenditure, while exercising extreme due ownership, and management of information
diligence and prudence when incurring capital system infrastructure. Further, with a view
expenditure until end 2023. Licensed Banks to encouraging Micro, Small and Medium
were further required to form a Board-Level Enterprises (MSMEs) and individuals with the
Sub Committee, to operate during the year potential to revive their businesses or income
and in 2024, to evaluate and approve non- streams to commence repayment of loans, while
essential, non-urgent and/or capital expenditure preventing any elevated strain on the financial

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sector, licensed banks were requested to provide strong, dynamic, and resilient LFCs over
appropriate concessions on a case-by-case basis the medium term, thereby safeguarding
through their branch network to the affected the interest of depositors and preserving
borrowers due to extraordinary macroeconomic financial system stability. Further, LFCs that
conditions that prevailed during the year. are unable to comply with the directions and
rules issued under the Finance Business Act
2.4.3 Policies related to Licensed No. 42 of 2011 and adhere to the Masterplan

2
Finance Companies (LFCs) will be directed to exit from the market upon
and Specialised Leasing cancellation of their licences.
Companies (SLCs)
Regulatory and resolution actions were
A guideline on the declaration of dividend/ initiated during the year in an expeditious
repatriation of profits was issued during manner, on companies, which were
the year to streamline the existing approval non-compliant with prudential directions
process of LFCs when declaring dividends and whose licences had been cancelled or
considering the profitability, capital suspended. These early interventions during the
adequacy and shareholder returns. It is year mitigated the likelihood of financial distress
envisaged to strengthen the resilience and or failure and helped curb any undue burdens
capacity of LFCs to absorb economic shocks that on the deposit insurance fund. The regulatory
could arise during times of uncertainty, while actions implemented in this regard included the
ensuring their ability to facilitate the credit needs imposition of restrictions on non-compliant LFCs
of customers. regarding deposits and borrowings, extension of
The LFCs and SLCs sector was requested the business suspension of a primary dealer, and
to grant concessionary measures with the appointment of liquidators in accordance with
view of safeguarding MSMEs and individuals the orders given by the Commercial High Court
amid the challenging macroeconomic for four failed LFCs, whose licences have been
conditions that were prevalent in recent cancelled or suspended.
years. These measures were focused on
facilitating the recovery of MSMEs and 2.4.4 Public Debt Management
individuals who possessed the potential to Policies
revive their business or income streams and
The Ministry of Finance, Economic
thereby would be able to commence repayment
Stabilization and National Policies
of loans. Such concessions extended by the
announced its policy on Sri Lanka’s
LFCs and SLCs encompassed restructuring and
Domestic Debt Optimisation (DDO)
rescheduling of credit facilities of performing
operation on 04 July 2023. The DDO
and non-performing borrowers, suspension
operation is a key initiative in efforts to restore
of recovery actions against non-performing
Sri Lanka's public debt sustainability under the
credit facilities on a case-by-case basis and
IMF-EFF arrangement. Accordingly, eligible
encouraging early settlement of existing
Treasury bonds held by eligible holders,
performing or rescheduled credit facilities by
Treasury bills held by the Central Bank,
applying reduced rates for early settlement
Provisional Advances made by the Central
charges and recovery of future interest.
Bank to the Government of Sri Lanka, Sri Lanka
The Masterplan for the Consolidation of Development Bonds (SLDBs), excluding those
Non-Bank Financial Institutions, which was held by individual investors and foreign currency
unveiled in 2020, will continue to create denominated bank loans of the Government

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Table Summary of the Domestic Debt The Central Bank envisages to continue
2.1 Optimisation (DDO) Operation existing MSME loan schemes, which were
Volume implemented on behalf of the Government
Item Execution Date Optimised
(Rs. Billion) and donor agencies, until the conclusion
SLDBs 15 August 2023 252
Treasury bonds 14 September 2023 3,204 of such loans despite its policy decision to
Treasury bills held by the Central Bank
and Provisional Advances provided by 21 September 2023 2,713 phase out new loan schemes, following the
the Central Bank to the Government
enactment of CBA. The operational periods

2
Source: Central Bank of Sri Lanka
of several loan schemes were extended during
issued under the local law were converted or the year considering the funding needs of the
exchanged into longer term Treasury bonds, as youth segment of the market and smallholder
applicable. The DDO operation was executed agribusinesses. Operating Instructions were
in several phases. All outstanding SLDBs were amended to expand the scope of the definition
either converted or settled in full by the end of of community based financial intermediaries
November 2023. The restructuring of remaining aiming to extend the reach of loan schemes
foreign currency denominated bank loans that were previously provided on behalf of
issued under local law is currently underway. the Government. Further, on behalf of the
The execution of the DDO operation helped Government, a loan scheme was introduced
create much needed fiscal space for the for Sri Lankan migrant workers in 2023, in
Government in the short to medium term. The collaboration with the Sri Lanka Bureau of
recent local currency credit rating assessments Foreign Employment, to encourage migrant
by international credit rating agencies also workers to remit foreign exchange earnings to
acknowledged these developments in their the country through formal channels.
forward looking opinion about Sri Lanka's
creditworthiness on local currency obligations, 2.4.6 Policies on Payments and
following the completion of the DDO. In the
Settlements
meantime, the Central Bank continued to
support the Government and the appointed The Central Bank implemented various
financial and legal advisors on the external debt policy measures to promote digital
restructuring process. payments, while ensuring the safety and
stability of payment systems during the
2.4.5 Policies for Financial year. The Central Bank continued its efforts to
Inclusion promote and enhance digital payments, focusing
Following the enactment of CBA, the on transactions made through the Instant
promotion of financial inclusion in Sri Payment System, the Common Electronic Fund
Lanka, in line with the need for a more Transfer Switch (CEFTS). Accordingly, the Multi-
inclusive and sustainable financial system tiered Liability Manager Limit structure applicable
has emerged as a policy priority of the to CEFTS was revised to accommodate a larger
Central Bank pertaining to regional volume of transactions.
development. The National Financial Inclusion
Strategy (NFIS) Action Plan is successfully in The Central Bank directed Licensed Banks to
operation in collaboration with stakeholders. integrate with the LankaPay Online Payment
Phase I of NFIS, which commenced in 2021, is Platform (LPOPP) in 2024 to facilitate
expected to be concluded in 2024. Meanwhile, online payments to government institutions,
the Financial Literacy Roadmap for Sri Lanka will enhancing efficiency and accessibility for the
soon be launched to nurture the creation of a public. Additionally, the Central Bank instructed
financially literate community. Licensed Banks to join the Government Digital

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BOX 5
Financial Literacy Roadmap of Sri Lanka (2024-2028):
Towards A Financially Literate Sri Lanka
1. Introduction kind of a national initiative are substantial and
Financial literacy that encompasses the knowledge multifaceted. With the introduction of the Central
and skills required to make informed financial Bank of Sri Lanka Act No.16 of 2023 (CBA), the
decisions, is integral to individual and societal Central Bank is vested with the statutory obligation

2
economic well-being across the globe. The to promote financial inclusion. Thus, on a broader
significance of financial literacy extends across footing, a national scale financial literacy initiative
various dimensions. It influences the economic could be considered as the most appropriate tool
outcomes of individuals by empowering them to to reach higher financial inclusion levels.
navigate the complex world of financial services, 3. Current Financial Literacy Landscape of Sri
make prudent investment choices, manage debts Lanka
effectively, and plan for future financial stability
(Lone & Bhat 2022). Beyond personal financial In order to identify the financial literacy landscape
well-being, it plays a critical role in shaping the of Sri Lanka, in 2021, the Central Bank jointly
macroeconomic landscape by fostering informed with the IFC of the World Bank Group (WBG)
consumer behaviour, enhancing the efficiency conducted the first ever nationally representative
of financial markets, reducing systemic risks, Financial Literacy Survey in Sri Lanka under the
promoting financial inclusion, and supporting Action Plan of the National Financial Inclusion
sustainable economic growth (Lusardi & Mitchell Strategy (NFIS).
2013). Results of the Financial Literacy Survey revealed
that when compared to the other countries
2. Global Advocacy and Experience in with comparable survey results, Financial
Improving Financial Literacy and its relevancy Knowledge of Sri Lankans are at satisfactory
for Sri Lanka levels. However, Financial Behaviour is lagging
The global advocacy for enhancing national behind, demanding careful consideration of the
financial literacy levels is a multifaceted policymakers. Translating financial knowledge
endeavour, which signifies a collaboration of into actual financial behaviour, is a multifaceted
innovative strategies, professional alliances, issue stemming from a range of reasons such as
and a commitment to sustainable development. issues in financial attitudes, behavioural biases,
International entities such as the Organisation for lack of practical experience, socioeconomic
Economic Cooperation and Development (OECD), barriers, and emotional factors. These elements
United Nations Development Programme (UNDP) collectively contribute and widen this gap,
World Bank, International Finance Corporation making it challenging for individuals to apply
(IFC) and Alliance for Financial Inclusion (AFI) their understanding of financial principles in
play pivotal roles in setting international standards real-world scenarios effectively. Poor financial
and providing guidelines, resources, and support behavior intensifies the vulnerability of individuals
to countries aiming to enhance their financial to economic shocks, contributes to macroeconomic
education frameworks. instability through reduced savings and higher
debt, increases inequality, and also impacts public
Overall, these entities emphasise the importance resources due to increased reliance on government
of tailored, targeted and inclusive financial literacy assistance programmes.
programmes that cater to the diverse needs of
the general public, especially vulnerable groups Moreover, even though there is no gender gap
(AFI 2021; OECD 2005). As a holistic tool, observed in financial inclusion, a modest gender
National Financial Literacy Strategies or Financial gap was observed in the financial literacy levels
Literacy Roadmaps have been utilised globally by of Sri Lanka (CBSL 2021a; 2021b). Accordingly,
governments and policymakers to drive a positive gender sensitive approaches should be introduced
change towards enhanced financial inclusion to bridge the gender divide. Thus, introducing
landscapes through improved financial literacy targeted behavioural interventions to support
levels (World Bank 2014). the translation of financial literacy, i.e., financial
knowledge and skills, into positive financial
In the context of Sri Lanka, the advantages which behaviour of Sri Lankans should be considered a
could be obtained by the implementation of this policy priority in the current context.

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4. The Policy Framework: Financial Literacy public and private education partners, and utilising
Roadmap of Sri Lanka existing resources for the effective delivery of the
Based on the findings of the Financial Literacy financial literacy interventions. The NFIS Secretariat
Survey 2021, the Central Bank in collaboration established in the Regional Development
with over 40 stakeholders, including financial sector Department of the Central Bank supports to
regulators, ministries, academia and other public operationalize the Action Plan. The existing
and private sector institutions, led the development governance structure of the NFIS is to oversee and
of the first ever Financial Literacy Roadmap of Sri ensure effective implementation of the Roadmap.

2
Lanka (the Roadmap). Addressing the changing and dynamic financial
5. Operationalisation of the Financial Literacy literacy needs of the economy is of paramount
Roadmap: Action Plan and Operational Pillars importance for the successful implementation of
such national level financial literacy initiatives.
The Roadmap consists of a 05-year Action Plan
Thus, the Action Plan of the Roadmap would be a
to be implemented from 2024 to 2028 with the living and open document that could be updated to
fundamental objective of improving the financial address such requirements, as necessary.
behaviour of Sri Lankans. The Action Plan currently
consists of 48 actions developed to reach 10 6. The Way Forward
objectives across the 04 Strategic Priorities of the Despite the remarkable policy commitment and
Roadmap. the successful development of the Roadmap,
These actions will be mainly focused on, inter alia, the path ahead is fraught with challenges albeit
strengthening the coordination, standardising the promising opportunities awaiting to be optimised.
financial literacy materials used by the stakeholders, The success of the Roadmap depends on several
supporting the transformation of the school children critical factors; aligning with national policies,
to financially capable individuals by the time they adapting to the evolving financial landscapes
leave school in collaboration with national level and global trends, creating accessible and

Policy Framework of the Financial Literacy Roadmap of Sri Lanka (2024-2028)

Vision “A Financially Literate Sri Lanka”

Empower all Sri Lankans towards greater financial inclusion with

requisite financial knowledge, skills and confidence to make
Mission well-informed and responsible financial decisions to increase
financial wellbeing of the people

(i) Effective Coordination and Harmonised Content

Strategic (ii) Increased Positive Financial Behaviour
Priorities (iii) Vigilant and Protected Financial Consumers
(iv) Generational Behaviour Change

(i) Youth and School Children

Target (ii) Identified vulnerable groups (Women, Migrant Workers, etc.)
Groups (iii) MSMEs
(iv) Professionals and Government Employees

(i) Economic and Financial Environment

Key (ii) Digital Financial Literacy
Contents (iii) Financial Management
(iv) Consumer Protection

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inclusive financial literacy interventions, fostering high priority. Addressing the diverse needs
partnerships, and establishing effective monitoring of the audience, keeping pace with the rapid
and evaluation frameworks, etc. These steps are advancements of financial innovations and
crucial to maximise the impact and sustainability of ensuring effective engagement of the target groups
financial literacy interventions, ultimately leading to and their accessibility to the interventions can
a financially literate and empowered population. threaten the effective implementation.
Moreover, leveraging existing resources such as
current levels of financial knowledge and skills, In light of the above, it is evident that significant

2
widespread access to financial services, and attention of all the stakeholders is needed for
increased digital penetration can catalyse the advancing the efforts put forward through the
impact of the interventions. Financial Literacy Roadmap, since there is an
unwavering promise for substantial economic and
Utilising the already established delivery channels social advantages by effectively combating financial
and networks like the Community Health Network, scams, reducing over indebtedness, alleviating
Network of Women Development Officers, and poverty, and breaking poverty traps. It further
Agrarian and Samurdhi Societies to deliver the encourages greater savings and investments on
financial literacy programmes under the Roadmap, both individual levels and national scales, which
will optimise the resource utilisation. Further, in turn, encourage internal capital formation and
with the participation of over 40 national level facilitate economic growth.
stakeholders, the outreach of the Roadmap is
expected to be significantly wide. In this regard, References

long-term commitment of the stakeholder 1. Alliance for Financial Inclusion (2021) National Financial Education Strategies
institutions is required to ensure the effectiveness Toolkit Available at https://www.afi-global.org/wp-content/uploads/2021/07/
NFES_toolkit_22082022.pdf
and the continuity of the Roadmap implementation. 2. Annamaria Lusardi and Olivia S. Mitchell (2013) “The Economic Importance of
More importantly, the commitment of the Financial Literacy: Theory and Evidence”, Journal of Economic Literature, American
Economic Association, vol. 52(1), pages 5-44 , Available at http://www.nber.org/
multilateral development partners is used to obtain papers/w18952
much needed technical and financial assistance, 3. CBSL (2021a), National Financial Inclusion Strategy of Sri Lanka: “Better Quality
Inclusion for Better Lives” Available at https://www.cbsl.gov.lk/sites/default/files/
considering the unprecedented nature of this cbslweb_documents/publications/annual_report/2021/en/13_Box_10.pdf
national endeavour. 4. CBSL (2021b) Financial Literacy Survey – Sri Lanka – 2021 https://www.cbsl.gov.lk/
sites/default/files/cbslweb_documents/financial_literacy_servey_sri_lanka_2021_e.
pdf
Nonetheless, the implementation process is 5. OECD (2005) Recommendation on Principles and Good Practices for Financial
challenging, as harmonised efforts towards Education and Awareness, Available at https://www.oecd.org/finance/financial-
education/35108560.pdf
successful implementation are critical. As a national 6. Umer Mushtaq Lone and Suhail Ahmad Bhat (2022) “Impact of financial literacy
level programme, aligning the Roadmap with on financial well‑being: a mediational role of financial self‑efficacy, Journal of
Financial Services Marketing”, Volume 29, pages 122–137 , Available at https://
broader economic and social policies demand doi.org/10.1057/s41264-022-00183-8.
effective coordination among key stakeholders 7. World Bank (2014) Financial Education Programs and Strategies; Approaches
and Available Resources, Available at https://documents1.worldbank.org/curated/
including the Government, financial institutions, en/901211472719528753/pdf/108104-BRI-FinancialEducationProgramsandStra
and educators, to ensure the Roadmap is given tegies-PUBLIC.pdf

Payment Platform (GDPP), facilitated by remittances. These measures entailed raising

LankaPay through LPOPP. This integration will the maximum value permitted for basic and
enable government institutions, without existing enhanced e-money accounts, aiming to promote
greater financial inclusion and convenience for
internal IT systems, to accept digital payments
individuals in remote areas and fostering the
from the public, particularly at the local
adoption of digital payment methods. Further,
government level.
the Central Bank decided to maintain the
In order to promote digital transactions LANKAQR Merchant Discount Rate (MDR) at
in remote areas, the Central Bank 0.5 per cent to encourage small and medium-
implemented measures to enhance the use sized merchants to accept digital payments at a
of e-money services for transactions and minimal cost.

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

To facilitate cross border retail payments, coordinated and concluded the National
the Central Bank granted approval for Risk Assessment (NRA) 2021/22 with
LankaPay (Pvt) Ltd (LPPL), the national the aim to identify, assess and better
payment network operator, to integrate understand the Money Laundering (ML)
with payment networks in China and India and Terrorist Financing (TF) risks faced by
considering their importance as source the country. The NRA highlighted the most
destinations of tourists visiting Sri Lanka. significant ML/TF threats, vulnerabilities, and

2
These integrations allow tourists from China and risks faced by Sri Lanka. The NRA assessed the
India to make payments to merchants who have
overall ML/TF risk for the country as ‘Medium’.
LANKAQR codes in Sri Lanka. With the view
Based on the findings of the NRA, the National
of creating a level playing field to balance the
AML/CFT Policy for 2023-2028 was prepared
higher interchange fee to be paid by Sri Lankan
and approved by the Cabinet of Ministers.
merchants to financial institutions in India and
China, a maximum MDR per transaction amount Aiming at preparing the key stakeholders for
has been decided for LANKAQR transactions the Mutual Evaluation of AML/CFT framework,
initiated through such foreign payment apps. which is scheduled to commence in March
2025, the Stakeholder-wise Action Plans for
The Central Bank implemented several 24 relevant stakeholder institutions were also
measures to enhance the safety of digital approved by the Cabinet of Ministers to improve
payments, aiming to improve the overall the effectiveness and technical compliance level
quality of digital transactions and encourage of AML/CFT framework of the country. The FIU
greater adoption of digital payment
conducted a series of follow-up meetings to
methods. These measures include mandating
discuss the progress of the Action Plans with the
real time notifications for credit and debit
relevant stakeholders. A Task Force for AML/
transactions, as well as ensuring immediate
CFT was appointed by the Cabinet of Ministers
updates for credit card settlements made
through digital channels. Additionally, Licensed to follow up on the progress of implementation
Banks were instructed to make the reference of the said Action Plans and to ensure that
field mandatory for digital transactions, and identified gaps are addressed comprehensively,
Licensed Financial Acquirers were advised to timely and effectively, while effectively
instruct their merchants not to pass the MDR coordinating among relevant stakeholders.
to customers. The Central Bank mandated
In addition to risk based supervision, the FIU
that mobile payment applications facilitating
continued to maintain its joint supervision
JustPay transactions request a One Time
Password (OTP) from the issuer of the linked policy in 2023. In order to strengthen the
account if the transaction amount equals or AML/CFT supervision process and institutional
exceeds Rs.10,000. JustPay enables users to compliance, the FIU issued circulars and
link accounts at any financial institution to their guidelines to Reporting Institutions, namely
mobile payment application and make payments Licensed Banks, LFCs, Real Estate Institutions,
by retrieving funds from these linked accounts. Licensed Insurance Companies, Licensed
Stockbrokers, and Attorneys-at-Law and
2.4.7 Anti-Money Laundering Notaries. Furthermore, during the year, 5
and Countering Financing red-flag indicator lists were issued, which
of Terrorism included the identification of suspicious
transactions relating to bribery or corruption,
During 2023, the Financial Intelligence Unit drug trafficking, and red flags for the insurance
(FIU) in line with the recommendations of sector, securities sector and money or value
the Financial Actions Task Force (FATF), transfer services sector.

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BOX 6
Mutual Evaluation of Sri Lanka 2025: Its National Significance

1. Introduction • Technical compliance: Implementation of the

Money Laundering (ML) and Terrorist Financing specific requirements of FATF Recommendations,
(TF) pose significant challenges to the world's including the framework of laws and enforceable
financial systems, as well as to national security means; and the existence, powers and

2
and economic stability. ML and TF affect countries procedures of competent authorities.
around the world by weakening their economies
and societies. While some countries are at higher • Effectiveness assessment: Effectiveness is the
risk due to weak governance and corruption, no extent to which financial systems and economies
country is entirely free from the risks associated mitigate the risks and threats of money
with ML and TF. Given the increasing prevalence laundering, and financing of terrorism and
of financial crimes worldwide, fighting against proliferation. This could be in relation to
ML and TF has become a global priority. It the intended result of a given (a) policy, law,
requires cooperation among governments and or enforceable means; (b) programme of law
law enforcement agencies, financial institutions, enforcement, supervision, or intelligence activity;
designated non-finance businesses and professions, or (c) implementation of a specific set of
and international organisations to protect the measures.
financial system and combat the risks of these
crimes. The stages in the ME process throughout which
the technical compliance and the effectiveness are
The Financial Action Task Force (FATF), the assessed, are outlined below.
global policy setter in Anti-Money Laundering
i. Assessing technical compliance (4 months):
and Countering the Financing of Terrorism (AML/
CFT), plays a vital role in combatting ML and TF The country provides information about its laws
by establishing global standards and promoting and regulations.
collaboration among nations. ii. Scoping: In preparation for the effectiveness
As a proactive step, FATF and FATF-Style Regional assessment and the on-site visit, assessors
Bodies (FSRBs) conduct Mutual Evaluations (MEs) undertake a preliminary scoping exercise to
to assess countries' technical compliance with the determine the areas of focus of the on-site visit.
FATF standards and their effective implementation iii.On-site visit (2 weeks): The assessors travel to
of AML/CFT measures. This evaluation process the country for the on-site visit.
has significant national importance for member
countries as it identifies weaknesses in national iv.Report drafting: Immediately following the
systems and identifies areas for improvement within on-site visit, the assessors finalise the mutual
their AML/CFT frameworks. At the same time, it evaluation report with the findings of the
promotes a level playing field among countries and effectiveness and technical compliance
encourages them to implement AML/CFT measures assessment.
on a consistent basis, globally.
v. Plenary discussion (15 months after
Sri Lanka will face its third ME in 2025. Given the technical compliance assessment): The
country's past experience of two MEs which resulted assessors present the draft report to the FATF
in it being included in the FATF “Grey List” and Plenary at one of the three meetings it holds
subsequent economic and financial repercussions, every year.
the upcoming ME will be a significant event in the
country’s economic and financial progression. vi.Final quality review (2 months after
approval): Following Plenary approval,
2. Mutual Evaluation Process the report is reviewed for technical quality and
The ME process involves an in-depth analysis of a consistency before it is published on the website.
country’s AML/CFT system undertaken as a peer
review. MEs are conducted over a period of 14 – vii.Follow-up: After adoption, the countries are
18 months and consist of two main components: required to address the shortcomings identified
technical compliance assessment and effectiveness in the report which are followed-up annually
assessment. until the next ME.

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3. National Significance of Mutual Evaluations gaps or deficiencies in enforcement which is

The ME process requires countries to implement crucial for preventing exploitation by criminals
the AML/CFT framework efficiently and effectively and enhancing the effectiveness of AML/CFT
ensuring a safe and robust financial system. measures.
Accordingly, achieving a favourable outcome in
the ME process ensures a secure financial system 4. Sri Lanka’s Past Experience of Facing Mutual
by protecting the country's position in the global Evaluations
financial system and thereby accelerating economic Sri Lanka has undergone two MEs by the Asia/

2
growth. Pacific Group on Money Laundering (APG), the
regional FSRB for the Indo-Pacific. The two MEs
The following are some of the factors which show were in 2006 and 2014/15. Both these evaluations
the national significance of MEs: resulted in Sri Lanka being listed by the FATF as
a “jurisdiction with strategic deficiencies” in its
i. Preserving Financial Stability: Effective AML/
AML/CFT framework, commonly referred to as
CFT measures play a vital role in preserving
"Grey Listing". The grey-listing resulted in adverse
the integrity and stability of the financial system. economic and financial consequences on both
By adhering to FATF recommendations, occasions.
countries mitigate the risk of being a high-risk
jurisdiction, which could adversely affect their Subsequent to Sri Lanka’s “Grey Listing” by the
access to international banking services and FATF after 2015, the European Commission also
capital markets. listed Sri Lanka as a high risk third country with
AML/CFT strategic deficiencies in February 2018,
ii. Enhancing National Security: A robust which affected Sri Lanka’s correspondent banking
AML/CFT regime is essential for national relationships.
security, preventing the use of illicit funds for
financing terrorism and other criminal activities. As Sri Lanka took steps to significantly improve
By undergoing MEs and rectifying identified its AML/CFT system subsequent to 2015, Sri
weaknesses, countries strengthen their capacity Lanka was delisted by the FATF and the European
to disrupt illicit financial flows, thereby Commission in October 2019 and May 2020,
respectively.
safeguarding national security interests.
5. Sri Lanka’s Preparedness for the Upcoming
iii.Compliance with International Standards:
Mutual Evaluation
Participation in MEs is vital for countries to
showcase their commitment to adhering to Given the adverse impacts of past evaluations,
international AML/CFT standards. Maintaining the upcoming ME will require Sri Lanka to further
these standards enhances a country's reputation strengthen the country's AML/CFT regime. This
requires collective action from stakeholders
in the global financial community while
including the government and law enforcement
promoting trust among international partners
agencies, financial institutions, designated non-
and investors. finance businesses and professions, coordinated by
iv.Facilitating International Cooperation: the Financial Intelligence Unit of Sri Lanka (FIU-SL).
Successful MEs promote greater international In this context, the country's preparedness is vital
cooperation and information sharing among to showcase its dedication to combating financial
countries in combating financial crime. crimes. This evaluation provides a thorough
Enhanced compliance with the FATF standards assessment of Sri Lanka's AML/CFT frameworks,
improves a country's standing within the global highlighting strengths, weaknesses, and areas
financial system, facilitating efficient for future improvement. Accordingly, several
collaboration with other jurisdictions in key initiatives have been taken by the FIU-SL, in
investigations and enforcement actions. This preparation for the ME.
collaboration strengthens the collective efforts
to combat ML and TF on a global scale, leading i. Establishing an AML/CFT Task Force: A task
to more effective outcomes in preventing and force for AML/CFT was appointed by the
deterring financial crimes. Cabinet of Ministers, comprising five members
under the chairmanship of a retired Supreme
v. Identification of Weaknesses: MEs enable Court Justice, to oversee the progress of
countries to identify weaknesses and gaps implementation of the stakeholder-wise
in their AML/CFT frameworks. Countries are action plans to address the identified gaps and
informed of vulnerabilities such as legislative coordination among relevant stakeholders.

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ii. Collaboration with the National international standards, the FIU is in the process
Coordinating Committee: The AML/CFT of amending key legislations which includes
National Coordinating Committee (NCC) is the Financial Transactions Reporting Act, No.
the advisory body that maintains national level 06 of 2006; the Prevention of Money
coordination among stakeholders in Laundering Act, No. 05 of 2006; the
implementing AML/CFT measures in Sri Lanka. Convention on the Suppression of Terrorist
With the leadership of the NCC and AML/CFT Financing Act, No. 25 of 2005. The FIU is
task force, all work relating to the upcoming ME also assisting in making the amendments to

2
is being coordinated. the Companies Act, No. 07 of 2007. These
amendments are expected to be completed by
iii. Conducting National Risk Assessment the third quarter of 2024.
(NRA) in 2021/22: In line with the FATF
recommendations, the FIU coordinated the 6. Conclusion
completion of the second NRA in 2021/22 to FATF MEs are events of national significance for
identify, assess and understand the ML/TF risks member countries, as they play a vital role in
faced by the country. Accordingly, the country’s assessing compliance with international AML/
overall ML/TF risk was assessed as "medium" CFT standards, identifying weaknesses in national
which is a combination of medium level of threat frameworks, enhancing national security, facilitating
and medium level of vulnerability. international cooperation, and preserving financial
stability. By actively participating in the ME process,
iv. Development of AML/CFT National Policy countries can strengthen the measures against
2023 – 2028: Based on the findings of the financial crime and contribute to a safer and more
NRA, the National AML/CFT Policy for 2023 secure global financial environment. Accordingly,
– 2028 was prepared, which was approved by collective efforts of all key stakeholders will
the Cabinet of Ministers, to address the gaps ensure that Sri Lanka’s AML/CFT framework is
identified to effectively combat ML and TF in the implemented efficiently and effectively, enabling the
country. country to achieve a better compliance level at the
upcoming ME while strengthening its position within
v. Developing stakeholder-wise action plans: the global financial community. 1
With the purpose of preparing the key
stakeholders for the next ME, the stakeholder-
wise action plans for relevant 24 stakeholder
institutions were approved by the Cabinet of References

Ministers to improve the effectiveness and 1. FATF (2012-2023), International Standards on Combating Money Laundering and
technical compliance level of AML/CFT the Financing of Terrorism & Proliferation, FATF, Paris, France, www.fatf-gafi.org/en/
framework of the country. The action plans publications/Fatfrecommendations/Fatf-recommendations.html
were distributed among stakeholders with regular 2. FATF (2013-2023), Methodology for Assessing Compliance with the FATF

updates being provided by them to the NCC and Recommendations and the Effectiveness of AML/CFT Systems, updated June 2023,
FATF, Paris, France, http://www.fatf-gafi.org/publications/mutualevaluations/
to the AML/CFT task force. documents/fatf-methodology. html
3. FATF (2021). What are FATF mutual evaluations?, https://www.fatf-gafi.org/content/
vi. Carrying out legislative amendments: In dam/fatf-gafi/methodology/Handout-5th-Round-Methodology.pdf
order to further strengthen the legal framework 4. Basel Institute on Governance (2023), Basel AML Index 2023: 12th Public Edition
on AML/CFT and to ensure adherence to the Ranking money laundering and terrorist financing risks around the world.

2.4.8 Policies for Financial transparency, fairness, and responsible business

Consumer Protection practices across the financial sector. Alongside
the prescribed two-tier complaint handling
The Central Bank took initiatives to procedure, the Regulation empowers the Central
strengthen the financial consumer Bank to initiate market conduct supervision,
protection framework in 2023. Regulation a crucial mechanism for ensuring effective
on Financial Consumer Protection was issued financial consumer protection. The Central
during the year for Financial Service Providers. Bank envisages to rollout consumer protection
The regulation underscores the commitment of regulations throughout 2024 to maintain the
the Central Bank to uphold the interests and integrity and stability of the financial system,
rights of financial consumers, while emphasising while prioritising the welfare of financial

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consumers in Sri Lanka. Contemplating the to the Deposit Insurance Fund. The Financial
need to safeguard the rights and interests of Sector Safety Net Strengthening Project (FSSNP),
the financial consumers and promoting ethical which was initiated with the collaboration of
standards among financial service providers, the the Government and the World Bank, seeks to
Central Bank envisages to commission Market fortify the financial and institutional capacities
Conduct Supervision as a strategic priority in
of SLDIS in accordance with international
2024.

2
standards. Under the FSSNP initiative, SLDIS was
strengthened through a financing mechanism
2.4.9 Policies on Deposit
Insurance and Resolution offered by the World Bank and backstop
of Financial Institutions funding arrangements were established with the
Government. A new investment policy is being
CBA designates the Central Bank as the drafted to expand SLDIS’ investment portfolio
resolution authority of licensed financial
across a range of instruments in both local and
institutions. The Banking (Special Provisions)
international financial markets. These policy
Act No. 17 of 2023 defines the resolution
driven enhancements aim to align SLDIS with the
authority of the Central Bank and stipulates
the measures that can be implemented to Core Principles for Effective Deposit Insurance
resolve a licensed financial institution in a timely Systems outlined by the International Association
manner; to revive such financial institutions as for Deposit Insurers, fortifying Sri Lanka's
a going concern to ensure the interests of the financial sector safety net.
depositors and creditors thereof ensuring the
financial system stability and winding up process 2.4.10 Financial Sector Policy
for such licensed banks. The Central Bank Reforms
initiated preparatory measures to implement the
provisions of the Banking (Special Provisions) Act The financial sector is undergoing significant
and to operationalise the resolution function. policy reforms as part of the IMF-EFF
These measures include the development of arrangement and in collaboration with
a Resolution Handbook, the establishment of multilateral agencies, with the view of
resolution triggers, the creation of a database addressing structural weaknesses, building
for licensed financial institutions and the resilience, and maintaining stability in the
formulation of data templates for resolution financial system. Independent Asset Quality
planning during 2023. These steps are aimed at Review (AQR) components of bank diagnostic
facilitating the preparation of resolution plans for
exercise for nine domestic banks accounting for
licensed financial institutions, ultimately ensuring
90 per cent of the domestic bank assets were
alignment with global standards and bolstering
the stability of the financial system in Sri Lanka. completed during the year. The scope of the
AQR encompassed rupee loans and advances,
CBA and the Banking (Special Provisions) foreign currency loans, advances, and foreign
Act recognise the establishment of the currency denominated financial instruments.
Sri Lanka Deposit Insurance Scheme The Central Bank developed a roadmap for
(SLDIS) as a means of upholding public
addressing banking system capital and foreign
confidence and promoting and contributing
currency liquidity shortfalls for five large banks
to the stability of the financial system in
subject to AQR through a careful assessment
Sri Lanka. The Banking (Special Provisions)
Act articulates operational procedures for the of the findings of AQR, forward looking stress
administration and management of SLDIS and testing and envisaged impact of sovereign debt
entrusts powers, duties and functions related restructuring. A similar process is underway

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 REVIEW OF CENTRAL BANK POLICIES

for the other four banks subject to AQR. 2.4.11 Other Policies
Strategies have been formulated for government
recapitalisation of viable banks that are unable Several measures were undertaken during
to close the capital shortfalls from private the year to improve public awareness
sources. Accordingly, under Budget 2024, an regarding both positive and negative
developments in the financial system. To
allocation of Rs. 450 billion has been made to
address customer concerns regarding digital
support the capital augmentation process of

2
payment methods, the Central Bank has taken
the banking sector. Further, amendments to the
proactive steps. A trilingual web form was
Banking Act No. 30 of 1988 were introduced
introduced on the Central Bank's website to
for further strengthening and streamlining the create public awareness regarding unsafe,
provisions which are under submission to the unsound, or unfair practices relating to payment
Parliament. services. The Central Bank also remains active
on all forms of social media to ensure that
The Financial Sector Crisis Management
essential messages, not only on monetary
Committee and Technical Committee on
policy, but also those related to the financial
Financial Management were established
system, including scams and prohibited financial
to strengthen the crisis preparedness
schemes, are disseminated promptly.
frameworks of the sector. These committees
consisted of officials from the Central Bank and During the year, steps were taken to
the Ministry of Finance to facilitate interagency improve stakeholder engagement. In
coordination and communication. The addition to monitoring engagement on all
committees are vested with the responsibility media platforms, several surveys and other
of addressing potential systemic crises in the focus groups were undertaken to continuously
financial sector and their effects on the real assess the effectiveness of strategies that were
economy and to minimise possible damages already in place. The establishment of these
to the financial sector. Two committees will feedback loops has helped to identify areas
operate in two phases. The committees will for improvement, gauge public sentiment, and
fine-tune communication strategies to meet
closely monitor the liquidity risks and capital
evolving needs. Building confidence in the
levels of regulated financial institutions during
financial system via prudent communication
the first phase. During the second phase, a
strategies is crucial for maintaining stability.
permanent framework will be established for
Several educational outreach programmes were
crisis preparedness, crisis management and to also conducted to a wide range of audiences to
minimise the impact of a financial crisis. supplement the aforementioned efforts.

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Featured Box Article

Major Economic Policy Measures Implemented by or Related to
the Central Bank of Sri Lanka1
Central Banking
15 September 2023 Enactment of the Central Bank of Sri Lanka Act, No. 16 of 2023, to provide for the establishment of the
Central Bank of Sri Lanka; for the repeal of the Monetary Law Act (Chapter 422); and to provide for matters
connected therewith or incidental thereto.

2
03 October 2023 The Monetary Policy Framework Agreement between the Minister of Finance and the Central Bank, gazetted
on October 5, 2023, sets an inflation target for the Central Bank, requiring it to maintain the Colombo
Consumer Price Index (CCPI) based quarterly headline inflation rate at 5 per cent.
Monetary Policy
02 January 2023 Effective 16 January 2023, the availability of the Standing Deposit Facility (SDF) to a particular Licensed
Commercial Bank (LCB) was limited to a maximum of five (05) times per calendar month, while the
availability of the Standing Lending Facility (SLF) to a particular LCB was capped at 90 per cent of the
Statutory Reserve Ratio (SRR) of such LCB at any given day.
03 March 2023 Standing Deposit Facility Rate (SDFR) and Standing Lending Facility Rate (SLFR) were increased by 100 basis
points to 15.50 per cent and 16.50 per cent, respectively.
01 June 2023 SDFR and SLFR were reduced by 250 basis points to 13.00 per cent and 14.00 per cent, respectively.
06 July 2023 SDFR and SLFR were reduced by 200 basis points to 11.00 per cent and 12.00 per cent, respectively.1
09 August 2023 The Statutory Reserve Ratio (SRR) was reduced by 2.00 percentage points to 2.00 per cent to be effective
from the reserve maintenance period commencing 16 August 2023.
05 October 2023 SDFR and SLFR were reduced by 100 basis points to 10.00 per cent and 11.00 per cent, respectively.
24 November 2023 SDFR and SLFR were reduced by 100 basis points to 9.00 per cent and 10.00 per cent, respectively.
09 February 2024 Effective 16 February 2024, the restriction on SLF was removed and the restriction on SDF was relaxed from
five times (05) to ten times (10) during a calendar month.
26 March 2024 SDFR and SLFR were reduced by 50 basis points to 8.50 per cent and 9.50 per cent, respectively.
Effective 01 April 2024, the restriction on SDF was removed.
Special Credit Schemes
15 September 2023 The Central Bank discontinued operations of the Saubagya Loan Scheme and Domestic Agriculture
Development Loan Scheme, with the enactment of the Central Bank Act No 16 of 2023.
03 January 2024 The Governing Board of the Central Bank took a policy decision not to implement new Government and
Donor funded loan schemes in future.
Payments and Settlements
01 February 2023 LankaPay (Pvt) Ltd (LPPL) linked with UnionPay International Co., Ltd (UPI), China and NPCI International
Payments Ltd (NIPL), enabling Chinese and Indian tourists to use their payment wallets via LANKAQR
for transactions in Sri Lanka. Transactions for Chinese tourists were enabled since February 2023 and
transactions for Indian tourists were initiated from 12 February 2024.
08 May 2023 A Merchant Discount Rate (MDR) of 1.8 per cent was approved for payments made through LANKAQR
using foreign payment apps. MDR of 0.5 per cent remains for domestic LANKAQR transactions.
31 August 2023 A trilingual web form to collect information from the public was developed on unsafe, unsound or unfair
practices relating to payment practices or services.
29 December 2023 The Central Bank mandated Licensed Banks (LBs) to participate in various digital transaction initiatives
including LankaPay Online Payment Platform (LPOPP), Direct Debit facility, Shared Know-Your-Customer

1
Includes major economic policy measures implemented since 01 January 2023 until 28 March 2024 and the policy measures that are to be implemented in the near future.

A detailed version of policy measures implemented by or related to the Central Bank of Sri Lanka and major fiscal policy measures implemented since
01 January 2023 until 28 March 2024 are available online

Path - Main Menu à Publications à Economic and Financial Reports à Annual Economic Review à Annual Economic Review 2023 à Major Economic
Policy Measures

Link - https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-economic-review/annual-economic-review-2023/major-economic-
policy-measures

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 REVIEW OF CENTRAL BANK POLICIES

(KYC) facility, and Government Digital Payment Platform (GDPP), while emphasising priorities such as
enabling real-time notifications for transactions, promoting digital transactions in remote areas, ensuring
immediate updating of credit card settlements via digital channels, and mandating the reference field for
digital transactions, with Licensed Financial Acquirers instructed not to pass MDR to customers.
29 December 2023 Promoting foreign remittances together with digital transactions via e-money wallets, the enhanced and
basic e-money wallet limits were raised from Rs. 50,000.00 and Rs. 10,000.00 to Rs. 150,000.00 and
Rs. 20,000.00, respectively, with effect from 01 January 2024.
17 January 2024 The Central Bank mandated mobile payment applications using JustPay to request a One-Time-Password

2
(OTP) from the linked financial institution for transactions equal to or exceeding Rs. 10,000/- starting from
April 1, 2024. JustPay facilitates users to link accounts from any financial institution and make payments by
pulling funds from linked accounts through the mobile application.
01 February 2024 Approval was granted for LankaPay (Pvt) Ltd (LPPL) to join with the Nepal Clearing House Ltd for the
acceptance of LANKAQR transactions made by Nepali tourists through NEPALPAY QR mobile applications.
Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT)
03 March 2023 Circular No. 01 of 2023 was issued on calling for due vigilance on compliance lapses to all LBs and LFCs.
07 June 2023 Circular No. 02 of 2023 was issued on institutional compliance of real estate sector under the Financial
Transactions Reporting Act, No. 06 of 2006 to Real Estate Institutions.
13 June 2023 Guideline No. 01 of 2023 was issued on reporting domestic Electronic Fund Transfer (EFT) threshold
transactions to the goAML System of the Financial Intelligence Unit.
07 August 2023 Approval of the Cabinet of Ministers was received for adoption of the National Policy on Anti-Money
Laundering and Countering the Financing of Terrorism (AML/CFT) of Sri Lanka for 2023-2028.
01 September 2023 Guideline No. 02 of 2023 was issued on AML/CFT compliance for the Attorneys-at-Law and
Notaries.
Foreign Exchange Management and International Operations
26 January 2023 Revocation of Operating Instructions issued on “Inward Investments Swaps - IIS Scheme”.
Issuance of instructions to LBs on participation at the USD/LKR buy-sell and sell-buy, foreign exchange
swaps auctions of the Central Bank.
24 February 2023 Reduction of weekly mandatory foreign exchange sales to the Central Bank by LBs on account of converted
inward workers’ remittances, converted service sector related exports proceeds/receipts, and the residual
value of mandatorily converted export proceeds of goods from 25 per cent to 15 per cent, effective from 27
February 2023.
27 February 2023 Directions No. 01 of 2023 were issued permitting Authorised Dealers (ADs) to open and maintain Special
Foreign Currency Accounts (SFCAs) - Investee
03 March 2023 Revocation of the Operating Instructions issued by the Central Bank to LBs on “Managing Intraday Volatility
of the Exchange Rate”, “Incentive Scheme on Inward Worker Remittances” and “Repatriation of Export
Proceeds into Sri Lanka” - with effect from 07 March 2023.
28 June 2023 Order under Section 22 of the Foreign Exchange Act No.12 of 2017 (FEA), published in the Extraordinary
Gazette Notifications No. 2338/40 dated 28 June 2023 to suspend/limit outward remittances with respect
to selected capital transactions for six months commencing from the date of the order.
04 December 2023 Directions No. 02 of 2023 were issued on Business Foreign Currency Accounts (BFCAs), including
enterprises permitted to sell goods/products to domestic market in terms of the Finance Act - Commercial
Hub Regulations No. 1 of 2019.
Directions No. 03 of 2023 were issued on Accommodations to BFCA Holders, permitting the payments to
the enterprises engaged in business activities in Sri Lanka which are permitted to sell goods/products to the
domestic market in terms of the Finance Act - Commercial Hub Regulations No.01 of 2019.
20 December 2023 Order under Section 22 of the FEA, published in the Extraordinary Gazette Notifications No. 2363/26 dated
20 December 2023, progressively easing some of the suspensions/ limitations relating to outward capital
and current transactions imposed by the Orders issued earlier for six months commencing from the date of
the Order.
01 January 2024 Directions No. 01 of 2024 were issued on Special Foreign Currency Accounts - Investee to facilitate current
transactions, by extending the validity of the same until 30 June 2024.
Debt Management
13 February 2023 The offering of Sri Lanka Development Bonds (SLDBs) under the Direct Issuance Arrangement was suspended.
16 March 2023 "Registered Stock and Securities (Disclosure of Information) Regulations, No.1 of 2023" was issued.

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

04 April 2023 In instances where the Monetary Policy announcement of the Central Bank is due during the normal Phase
II window, Phase II of the respective Treasury bill auction is executed for a period of one hour immediately
post a Treasury bill auction or close of business of the auction day whichever falls later.
12 May 2023 A resolution to increase the limit on issuance of Treasury bills from Rs. 5,000.0 billion to Rs. 6,000.0 billion
in terms of the Local Treasury Bill Ordinance No. 08 of 1923 was approved by Parliament.
19 June 2023 The new web-based Treasury bill issuance system was introduced with effect from 21 June 2023.
04 July 2023 The Ministry of Finance (MOF) announced a policy on Sri Lanka’s Domestic Debt Optimisation (DDO),

2
consistent with the Extended Fund Facility, to contribute to meeting the Debt Sustainability targets agreed
upon with the International Monetary Fund.
21 August 2023 The Appropriation (Amendment) Bill to amend the maximum borrowing limit of the Government from Rs.
4,979.0 billion as set out in Section 2(1)(b) of the Appropriation Act, No. 43 of 2022, to Rs. 13,979.0
billion, was approved by the Parliament.
14 September 2023 As per the Exchange Memorandum for Treasury bonds issued under the DDO programme, the settlement
of the Treasury bonds exchange was carried out. Accepted offers were converted into new Treasury bonds
amounting to Rs. 3,204.5 billion which had longer maturities. Furthermore, an accrued interest of Rs. 110.9
billion was paid to investors for their accepted Treasury bond amounts.
20 September 2023 The new web-based system for Direct Issuance Window for Treasury bonds was introduced with effect from
25 September 2023.
21 September 2023 Outstanding credits (the “provisional advances”) of Rs. 344.7 billion from the Central Bank to the
Government and outstanding Treasury bills amounting to Rs. 2,368.4 billion of the Government purchased
by the Central Bank in the primary market were converted into ten (10) step-down fixed coupon new
Treasury bonds denominated in LKR amounts to Rs. 2,492.3 billion and twelve (12) existing Treasury bills
amounts to Rs. 220.8 billion and settled on 21 September 2023 in terms of the section 129 (2) of the CBA
and the Appropriation (Amendment) Act, No. 12 of 2023.
03 November 2023 The Foreign Currency Banking Unit (FCBU) Loan exchange under the DDO programme was executed for
People’s Bank in terms of the Memorandum of Understanding (MOU) for restructuring of the FCBU loan
balance of People’s Bank signed on 18 August 2023. The loan amount of Rs.27.7 billion was allocated to
five existing Treasury bonds that were issued under DDO.
11 March 2024 The amount offered at Phase II of Treasury bill auctions was reduced to the aggregate auction shortfall and
10 per cent of the aggregate amount offered or Rs. 5.0 bn whichever is higher in terms of the amended
Directions issued on 07 March 2024 which were in force effective from 11 March 2024.
The amount offered at Direct Issuance Window (DIW) of Treasury bond auctions was reduced to 10 per cent
of the amount offered from ISINs which are fully accepted at Phase I in terms of the amended Directions
issued on 07 March 2024 which were in force effective from 11 March 2024.
Financial Sector
Licensed Banks
02 January 2023 A Circular was issued with effect from 03 January 2023 adjusting the Bank Rate in line with the latest
available Average Weighted New Deposit Rate (AWNDR) published by the Central Bank with a margin of
+300 basis points.
31 January 2023 Banking Act Determination was issued determining qualifying non-financial corporate debt securities and
qualifying non-financial common equity shares as liquid assets in the computation of the Statutory Liquid
Asset Ratio of LCBs and Licensed Specialised Banks (Licensed Banks - LBs), given that such instruments shall
satisfy the conditions specified in the Banking Act Directions on the Liquidity Coverage Ratio under Basel III
liquidity standards.
02 February 2023 Banking Act Directions were issued restricting discretionary payments of LBs considering the prevailing
macroeconomic conditions and the importance of maintaining appropriate level of liquidity and capital to
ensure sustainability in LBs.
16 February 2023 In addition to the existing list of HS Codes covered by the Order dated 19 May 2022, an Order was issued
to all LCBs on the requirement of maintaining a 100 per cent Cash Margin Deposit Requirement against
Letters of Credit for newly added 64 HS Codes.
17 February 2023 Amendment to the Banking Act Directions No. 03 of 2022 on Margin Requirements Against Imports was
issued, extending the applicability of the cited Directions to 64 new HS codes.
07 March 2023 LBs were requested to provide appropriate concessions to affected borrowers on a case-by-case basis with
a view to encouraging Micro, Small and Medium Enterprises (MSMEs) and individuals with a potential to
revive their businesses/income streams.

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21 April 2023 A circular was issued to LBs informing to discontinue the recognition of ICRA Lanka Ltd as an eligible/
acceptable credit rating agency for regulatory purposes pertaining to LBs.
25 April 2023 Amendments to the Banking Act Directions No. 01 of 2023 on Restrictions on Discretionary Payments of
LBs were issued. Accordingly, LBs were required to refrain from increasing management allowances of
Chief Executive Officers (CEO), Key Management Personnel (KMP) and payments to the Board of Directors,
without meeting the cited requirements.
17 May 2023 A Circular was issued to withdraw the minimum cash margin deposit requirements against Letters of Credit,
imposed on 19 May 2022 and 16 February 2023.

2
18 May 2023 Banking Act Directions were issued, revoking the Banking Act Directions No. 03 of 2022 and the Banking
Act Directions No. 02 of 2023 on Margin Requirements Against Imports.
25 August 2023 A Monetary Law Act Order was issued on the interest rates applicable on Sri Lankan Rupee (LKR) denominated
lending products of LBs, imposing maximum interest rates on certain lending products and requiring LBs
to reduce the interest rates of all other new and existing rupee denominated lending products by specific
percentages on target dates.
15 November 2023 The Banking (Special Provisions) Act No. 17 of 2023 (BSPA) was certified by the Parliment on 14 September
2023 and by order published in the Gazette No. 2358/46, the provisions of the aforesaid Act came into
operation effective from 15 November 2023.
The Banking (Special Provisions) Act Directions No. 01 of 2023 was issued to Member Institutions of the Sri
Lanka Deposit Insurance Scheme.
23 November 2023 A Banking Act Determination on annual license fee was issued to LBs informing the new license fee structure
applicable for the years 2024 and 2025.
27 November 2023 Determinations made under the BSPA were issued to the general public under the Gazette Notification No.
2360/02.
08 December 2023 Amendments to the Banking Act Directions No. 16 of 2021 on Regulatory Framework on Technology
Risk Management and Resilience for LBs were issued inter alia extending the general deadline and certain
specific timelines, considering the extraordinary circumstances prevailed during the recent past.
29 February 2024 Amendments to the Circular No.08 of 2019 on “List of Qualified Auditors to Audit the Accounts of Licensed
Commercial Banks and Licensed Specialised Banks” were issued by replacing Picewaterhouse Coopers and
SJMS Associates as Deloitte Partners and Deloitte Associates, respectively with the changes of names of
aforesaid audit firms.
25 March 2024 Banking Act Directions were issued on “Large Exposures of Licensed Banks”, to be implemented with
effect from 01 January 2026, with a view to mitigating the credit concentration risks, ensuring safety and
soundness of the banking sector.
28 March 2024 A circular was issued on “Guidelines for the Establishment of Business Revival Units in Licensed Banks”,
with a view to facilitating the sustainable revival of businesses affected by the extraordinary macroeconomic
circumstances and to improve the asset quality of LBs.
Forthcoming Banking (Amendment) Act
Revised Directions on Corporate Governance
Licensed Finance Companies (LFCs), Specialised Leasing Company (SLC), Licensed Microfinance Companies (LMFCs),
and Primary Dealer Companies (PDCs)
05 January 2023 The Monetary Board of the Central Bank, in terms of the Regulations made under the Registered Stock
and Securities Ordinance and the Local Treasury Bills Ordinance, extended the suspension of Perpetual
Treasuries Limited (PTL) from carrying on the business and activities of a Primary Dealer for a further period
of six months with effect from 05 January 2023, in order to continue with the investigations being conducted
by the Central Bank.
18 January 2023 The registration of Swarnamahal Financial Services PLC as a registered finance leasing establishment was
cancelled in terms of Section 9.1. (h) of the Finance Leasing Act, No.56 of 2000 (FLA).
31 January 2023 Subsequent to the amalgamation of the LOLC Development Finance PLC (LDFP) with LOLC Finance PLC
(LOFP) as a part of the Masterplan for Consolidation of Non-Bank Financial Institutions (the Masterplan),
the Monetary Board of the Central Bank cancelled the licence issued to LDFP to carry on finance business
under the Finance Business Act, No.42 of 2011 (FBA). Further, the registration of LDFP issued under the FLA
was cancelled by the Director, Department of Supervision of Non-Bank Financial Institutions (D/DSNBFI).
Guideline on declaration of dividends or repatriation of profits was issued to LFCs as a measure to strengthen
resilience and capacity of LFCs to absorb economic shocks that could arise in the time of uncertainty and
continue to support credit needs of customers, by maintaining sufficient capital.

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

02 February 2023 LFCs were informed that ICRA Lanka Ltd. was removed as an acceptable credit rating agency for specified
purposes.
08 February 2023 The Commercial High Court of Colombo ordered to appoint a liquidator to The Standard Credit Finance
Limited whose license cancelled by the Monetary Board on 25 July 2018 under FBA subject to supervision
of court.
03 March 2023 LFCs and SLC were requested to provide appropriate concessions to micro, small and medium enterprises
and individuals affected by the present macroeconomic conditions.

2
21 March 2023 The Commercial High Court of Colombo ordered to appoint a liquidator to The Finance Company Ltd of
which licence cancelled by the Monetary Board on 22 May 2020 under FBA subject to supervision of court.
25 April 2023 Notice of cancellation of the finance business licence of Bimputh Finance PLC (BFP) was issued with effect
from 25 April 2023 as directed by the Monetary Board of the Central Bank under section 37 (1) of FBA.
09 June 2023 The Commercial High Court of Colombo ordered to appoint a liquidator to Central Investments and Finance
Ltd whose licence cancelled by the Monetary Board on 05 March 2018 under FBA subject to supervision of
court.
05 July 2023 The Monetary Board of the Central Bank, in terms of the Regulations made under the Registered Stock and
Securities Ordinance and the Local Treasury Bills Ordinance, extended the suspension of PTL from carrying
on the business and activities of a Primary Dealer for a further period of six months with effect from 05 July
2023, in order to continue with the investigations being conducted by the Central Bank.
31 July 2023 As a part of the Masterplan, Kanrich Finance Ltd was merged with Nation Lanka Finance PLC (NLFP) with
effect from 31 July 2023 and the remaining entity is NLFP.
01 September 2023 Finance business licence issued to BFP was cancelled with effect from 01 September 2023 as directed by
the Monetary Board of the Central Bank due to no satisfactory progress made by BFP to revive the critical
condition faced by BFP.
15 December 2023 The Commercial High Court of Colombo ordered to appoint a liquidator to ETI Finance Ltd under FBA
subject to supervision of court.
05 January 2024 The Governing Board of the Central Bank, in terms of the Regulations made under the Registered Stock and
Securities Ordinance and the Local Treasury Bills Ordinance, extended the suspension of PTL from carrying
on the business and activities of a Primary Dealer for a further period of six months with effect from 05
January 2024, in order to continue with the investigations being conducted by the Central Bank.
13 February 2024 A Direction was issued on periodic reporting requirements with the objective to obtain timely, accurate,
consistent and complete information of LFCs to ascertain the manner in which the business and corporate
affairs of LFCs are being conducted or for any other specified purpose.
Forthcoming Implementing Phase II of the Masterplan ensuring long term sustainability of small to medium scale LFCs in
the medium term.
Amending the existing regulatory framework in line with the current market developments, including
amendments to the FBA and FLA.
Introducing rules and regulations to improve stability of the non-banking sector while strengthening the
supervisory review process.

Other Financial Sector Related Policy Measures

08 August 2023 Regulations on Financial Consumer Protection were issued under Section 10 (c) of Monetary Law Act, No.
58 of 1949 (MLA), which are applicable to Financial Service Providers (FSPs) regulated by the Central Bank
to promote fair, transparent, and ethical business conduct of FSPs and provide the basis for the Central Bank
to carry out market conduct supervision and enforcement.
31 January 2024 Loan Agreements were signed between the International Development Association (IDA) which is a member
01 February 2024 of the World Bank Group, MOF and the Central Bank under the Financial Sector Safety Net Strengthening
06 February 2024 Project of the World Bank.

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 Chapter 3
MACROECONOMIC OUTLOOK

Summary
The Sri Lankan economy is expected to continue to recover and reach its potential in
the coming years, bolstered by the return of greater macroeconomic stability. Assuming
the uninterrupted continuation of ongoing ambitious reforms and economic adjustments
underpinned by the Extended Fund Facility (EFF) programme of the International Monetary
Fund (IMF), stability is envisaged on multiple fronts. Following the swift disinflation process,
inflation is expected to remain around the target of 5 per cent on average during 2024, despite
intermittent fluctuations caused by supply side shocks amid lower demand conditions. Inflation
is expected to stabilise around the target over the medium term, supported by appropriate
policy measures. The Central Bank’s independence coupled with greater public accountability
in monetary policymaking would be instrumental in maintaining domestic price stability over
the medium term. Early signs of economic recovery that were observed in the second half of
2023 are expected to translate into a broadbased recovery across all sectors in the ensuing
period. Despite a possible widening in the trade deficit driven by the revival of imports along
with increased economic activity, the external sector is anticipated to build upon the favourable
developments in 2023, with the revived tourism sector, elevated levels of workers’ remittances,
and expected non-debt creating inflows, while augmenting external buffers. With the waning
of vulnerabilities that were profound in 2023, the financial sector is expected to expand its
service provision in the period ahead, with improved resilience bolstered by the strengthening
of the legislative structure. On the fiscal front, the Government is expected to persevere with
its fiscal consolidation efforts, while continuing the much needed reform drive to ensure the
transition of the economy towards a sustainable path. Amidst longer term challenges arising
from climate change, population ageing and geopolitical tensions, the overall outlook for the
Sri Lankan economy in the medium to long term will be conditional on the continuation of
the IMF-EFF programme with the successful completion of the debt restructuring process and
uninterrupted execution of productivity and efficiency enhancing reforms with broader political
and social consensus.
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

3.1 Global Economic Table

3.1
Global Economic Developments
and Outlook (a)
Environment and Outlook
2022 2023 2024 2025
(b) (c) (Proj) (Proj)
The global economy showed signs of World Output 3.5 3.1 3.1 3.2
Advanced Economies 2.6 1.6 1.5 1.8
resilience in 2023 and is expected to United States 1.9 2.5 2.1 1.7
recover from a multitude of economic woes Euro Area
United Kingdom
3.4
4.3
0.5
0.5
0.9
0.6
1.7
1.6
including sluggish growth, stubbornly slow Japan 1.0 1.9 0.9 0.8
Emerging Market and Developing Economies 4.1 4.1 4.1 4.2
disinflation, and risks emanating from Emerging and Developing Asia 4.5 5.4 5.2 4.8
China 3.0 5.2 4.6 4.1
geopolitical uncertainties, going forward. India 7.2 6.7 6.5 6.5
World Trade Volume (Goods and Services) 5.2 0.4 3.3 3.6
According to the World Economic Outlook Price Movements
Consumer Prices
(WEO) update of the IMF released in January Advanced Economies 7.3 4.6 2.6 2.0

3
2024, global growth is estimated to have slowed Emerging Market and Developing Economies
Commodity Prices
9.8 8.4 8.1 6.0

down from 3.5 per cent in 2022 to 3.1 per cent Oil 39.2 -16.0 -2.3 -4.8
Non-fuel 7.9 -6.1 -0.9 -0.4
in 2023. Global growth is projected to remain (a) Annual percentage change unless Source: World Economic Outlook
otherwise indicated (January 2024), IMF
around 3.1 per cent in 2024 and accelerate to (b) Revised
(c) Provisional
3.2 per cent in 2025 on account of the stronger
rebound in several large economies, including
economic growth in advanced economies may
the United States (US), and fiscal stimulus in
also have a bearing on the much anticipated
China. However, the projected global growth
resurgence of high-spending tourist arrivals to
rates for 2024-2025 are below the historical Sri Lanka. Meanwhile, emerging markets and
average (2000-2019) of 3.8 per cent, reflecting developing economies are expected to maintain
the impact of restrictive monetary policies to a stable growth of 4.1 per cent in 2023 and
curb inflation, fiscal tightening amidst high 2024, the same as in 2022, which is expected
debt weighing on economic activity, and low to rise to 4.2 per cent in 2025. The resilience
underlying productivity growth. Advanced in these economies mainly reflects the strong
economies are expected to experience a growth rates in India and China. The Indian
slowdown, with growth dropping from 2.6 economy is estimated to have grown by 6.7
per cent in 2022 to 1.6 per cent in 2023 and per cent in 2023 and projected to remain
1.5 per cent in 2024, before rising to 1.8 strong at 6.5 per cent in both 2024 and 2025
per cent in 2025. Although Eurozone economies reflecting robust domestic demand. Economic
and the United Kingdom are expected to recover growth in China is estimated at 5.2 per cent in
from their low rates of growth in 2024, owing 2023 and it is projected at 4.6 per cent and
to waning effects of the war in Ukraine, the 4.1 per cent in 2024 and 2025, respectively,
moderate growth in advanced economies is considering the increased fiscal support to
mainly attributed to the slowdown in the US with build capacity against natural disasters. Higher
lagged effects of monetary policy tightening anticipated growth rates in China and India are
as well as contractionary fiscal policies. This expected to have a favourable impact on the
anticipated growth moderation in advanced Sri Lankan economy, given the strong economic
economies could have an adverse impact on and geopolitical linkages with these economies,
Sri Lanka’s export performance as the US and particularly in terms of merchandise trade,
the European Union are the largest export tourism, Foreign Direct Investment (FDI) and
destinations for Sri Lanka. Also, subdued financial assistance.

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 MACROECONOMIC OUTLOOK

Global headline inflation is falling faster inflation in many advanced and emerging
than expected due to monetary policy market economies. Despite some early signs of
tightening, softening labour markets and inflation moderating, incoming data and other
passthrough effects of the relative decline unfavourable global developments such as the
in energy prices, thus creating conducive economic decoupling where Western economies
conditions for the envisaged easing of have loosened ties with China, and tensions
global monetary conditions. Global inflation in the Red Sea and its impact on global and
is expected to have gradually decelerated regional supply chains, together with downward
from 8.7 per cent in 2022 to 6.8 per cent in rigid core inflation levels have led central banks
2023 and projected to moderate further to globally to remain cautious in easing their
5.8 per cent in 2024. Although commodity monetary policy stance in 2024. Meanwhile,

3
prices, mainly oil prices, are expected to the US dollar strengthened against other major
decline over the next two years contributing to currencies so far in 2024. This can be attributed
faster disinflation, new commodity price spikes to robust economic performance in the US,
resulting from geopolitical shocks, including including higher than expected surge in new
possible escalation of the conflict in Gaza to the job additions to the US economy. Further, the
Middle East region as well as continued attacks delay in normalisation of interest rates amidst
in the Red Sea, could accelerate global inflation. persistent inflationary pressures is also expected
Higher global energy prices may result in to contribute towards a stronger US dollar in the
increased import expenditure thereby widening near future.
the trade deficit while also weighing on inflation
in many countries, including Sri Lanka. 3.2 Domestic Economic Outlook
Meanwhile, weather related shocks such as
floods and droughts together with the El Niño 3.2.1 Inflation Outlook
phenomenon could cause food price hikes
Despite intermittent fluctuations caused by
and jeopardise efforts to restore price stability
supply side deviations amid lower demand
globally. Additionally, many economies
conditions, inflation is expected to stabilise
face significant debt distress risks due to around the targeted level over the medium
escalating debt service costs necessitating fiscal term, supported by appropriate policy
consolidation measures which could hinder measures. Following the rapid disinflation
growth prospects further. process, inflation reached lower single digit
levels towards end 2023. However, a temporary
The global monetary policy stance which
uptick in inflation was observed during early
was gradually tightened in 2022 in view
2024, mainly driven by the Value Added Tax
of rising inflationary pressures, was further
(VAT) adjustments implemented in January
tightened to significantly high levels during
2024. Nevertheless, the realised data thus
2023 as inflation remained excessively far in 2024 indicates that the direct impact of
stubborn. Supply disruptions due to geopolitical the VAT change on inflation and its second
tensions, lagged effects of monetary and fiscal round effects may not be as large as initially
stimulus during the pandemic, high inflation envisaged amidst subdued demand. Moreover,
expectations, and wage pressures were key the effects of this tax increase are anticipated
factors that contributed to the persistence in to be partly offset by the notable downward

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 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

revisions to electricity tariffs effective from March information, inflation is expected to decline
2024 and the moderation in food prices. These for a short period in early 2025, mainly due
effects partially accounted for the considerable to the favourable base effect associated with
reduction of inflation observed in March the increase in inflation due to tax adjustments
2024, and as per the current projections of the and notable food inflation in early 2024 in
Central Bank,1 they are expected to contribute the absence of aggregate demand pressures.
to inflation remaining below the target of 5 per Meanwhile, core inflation is projected to rise in
cent during the second quarter of 2024. The the upcoming quarters, largely due to changes
trajectory for headline inflation during the latter in the VAT structure, despite subdued demand
half of the year could be somewhat impacted conditions. This projected path of core inflation
by the next round of revisions to electricity tariffs is also contributed by the fact that it may not

3
and cost reflective monthly revisions to fuel benefit from the direct impact of reduced
and gas prices. However, inflation is expected
electricity tariffs as energy related expenses are
to remain around the target of 5 per cent, on
not included in the core consumption basket,
average, during 2024. As per currently available
and the relatively high persistence that is usually
1 The Central Bank uses a Quarterly Projection Model (QPM), which is a semi-structural
macroeconomic model, to arrive at medium term macroeconomic projections. observed in core inflation. Similar to headline
Projections are updated during each monetary policy round, using data on the latest
economic developments, including, but not limited to, monthly releases of inflation inflation, core inflation is expected to follow a
data and quarterly releases of GDP data by the Department of Census and Statistics
(DCS) and global macroeconomic forecasts. In addition to data updates, forecast near
term movements of key macroeconomic variables together with staff judgements, are
declining trend in early 2025, partly contributed
taken as key inputs for QPM based medium term projections. The projections discussed
in the Annual Economic Review 2023 are based on the March 2024 forecast round.
by the favourable base effect, albeit at a lower
Figure
3.1 Headline Inflation Projections CCPI* (quarterly average, year-on-year, %)

75

60

45

30

15

Realised Projection

-15
21/IV 22/I II III IV 23/I II III IV 24/I II III IV 25/I II III IV

50% CI 70% CI 90% CI Realised Inflation

*Realised data up to Q4 2022 shown in the fan chart are based on CCPI (2013=100, seasonally adjusted), while data after this period are based on CCPI (2021=100, seasonally adjusted).

Note: A forecast is neither a promise nor a commitment

The projections reflect the available data, assumptions and judgements made at the forecast round in March 2024.
The fan chart illustrates the uncertainty surrounding the baseline projection path using confidence bands of gradually fading colours. The confidence intervals (CI) shown on the chart indicate the ranges of values within
which inflation may fluctuate over the medium term. For example, the thick green shaded area represents the 50 per cent confidence interval, implying that there is a 50 per cent probability that the realised inflation outcome
will be within this interval. The confidence bands show the increasing uncertainty in forecasting inflation over a longer horizon.
Source: Central Bank Staff Projections

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 MACROECONOMIC OUTLOOK

Table
3.2 Near term Macroeconomic Projections (a)

Projections
Indicator Unit 2022 (b) 2023 (c)
2024
Real Sector (d)
Real GDP Growth % -7.3 (c) -2.3 3.0
GDP at Current Market Price Rs. tn 24.1 (c) 27.6 29.9
Per Capita GDP (e) (f) USD 3,464 (c) 3,830 4,075
Total Investment % of GDP 28.6 (c) 25.3 25.8
Domestic Savings % of GDP 25.0 (c) 23.8 22.4
National Savings % of GDP 27.2 (c) 27.2 26.3
External Sector (d)
Trade Balance % of GDP -6.7 -5.8 -7.8
Exports USD bn 13.1 11.9 12.9
Imports USD bn 18.3 16.8 20.0
Current Account Balance (g) % of GDP -1.9 1.8 0.5
External Official Reserves Months of Imports 1.2 3.1 3.4

3
Fiscal Sector
Total Revenue and Grants % of GDP 8.4 (h) 11.1 (d) 13.0 (i)
Expenditure and Net Lending % of GDP 18.6 (h) 19.4 (d) 22.3 (i)
Current Account Balance % of GDP -6.4 (h) -6.0 (d) -3.2 (i)
Primary Account Balance % of GDP -3.7 (h) 0.6 (d) 0.8 (i)
Primary Account Balance (With Bank Recapitalisation) % of GDP - - -1.3 (i)
Overall Budget Deficit % of GDP -10.2 (h) -8.3 (d) -7.3 (i)
Overall Budget Deficit (With Bank Recapitalisation) % of GDP - - -9.4 (i)
Central Government Debt % of GDP 114.2 (h) 103.9 (d) 110.3 (i)
Monetary Sector and Inflation
Broad Money Growth (M2b) (j) % 15.4 7.3 15.0
Private Sector Credit Growth (in M2b) (j) % 6.2 -0.6 8.5
Annual Average Inflation % 46.4 (k) 17.4 (l) 5.0 (l)
(a) Based on information available up to mid-March 2024 Sources: Department of Census and Statistics
(b) Revised Ministry of Finance, Economic
(c) Provisional Stabilization and National Policies
(d) GDP estimates (base year 2015) released in March 2024 by the Department of Census and Statistics have been used Central Bank of Sri Lanka
(e) Estimates updated with the latest population figures
(f) Based on quarterly GDP in USD terms calculated using quarterly average exchange rate
(g) Based on accrual basis
(h) Revised based on the latest GDP data published by the Department of Census and Statistics on 15 March 2024
(i) Projections for 2024 are based on 2023 December IMF staff report
(j) Year-on-year growth based on end year values
(k) Based on CCPI (2013=100)
(l) Based on CCPI (2021=100)

magnitude than that of headline inflation. conditional on the model-consistent interest rate
However, core inflation is expected to stabilise path and resulting macroeconomic responses.
around mid-single digit levels over the medium Any notable change in these assumptions could
term with appropriate policy measures. lead to the realised inflation path deviating
from the projected path. Risks to the projection
Given the prevailing domestic and global
arise due to the possibility of various factors
economic uncertainties, adverse weather
conditions, and geopolitical tensions, the deviating from the levels already internalised
risks associated with the current projections in projections, either explicitly or implicitly,
are higher than in normal times. Current and due to any unforeseen developments. In
projections are conditional on the forecasts of particular, there are substantial upside risks to
global energy and food prices, gradual growth inflation projections stemming from factors such
recovery of Sri Lanka’s major trading partners, as the impact of the possible upward pressures
the anticipated domestic fiscal path in line on global food and energy prices amidst
with the IMF-EFF projections under the debt uncertainties; the impact of adverse weather
restructuring scenario, and global financial on agricultural production and in turn on food
conditions implied by the monetary policy prices; the possible upward revision to electricity
stance of the USA. Further, the projections are prices more than initially anticipated, for which

107
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

weather anomalies can also be a contributing to grow by 3 per cent in 2024 as the benefits
factor, among others, that could affect the of the eased monetary policy stance and low
electricity generation mix, requiring the use of inflation environment continue to be gradually
costlier sources; and the possible realisation channelled into the economy. The faster than
of the demand for higher wages. Meanwhile, expected recovery of the tourism sector is
downside risks to inflation projections include expected to support the growth momentum
a faster recovery of supply conditions and the in the near term with positive spillover effects
sustained impact of diminished purchasing on other related sectors. The industry sector
power of the public. The Central Bank will is expected to benefit from recent positive
continue to communicate to the public the developments such as the lifting of import
possible deviations in the inflation outlook based restrictions, declining cost of credit and raw
on upcoming changes to domestic and global material prices. Leading indicators also show

3
economic conditions at each monetary policy a revival in construction sector activities in light
round, underpinned by data driven monetary of the aforementioned developments coupled
policy formulation under the Flexible Inflation
with the resumption of several previously halted
Targeting (FIT) framework.
infrastructure development projects of the
Government. The recently concluded 2023/24
3.2.2 Growth Prospects
Maha season is expected to have recorded
Following six quarters of year-on-year positive yields across major crops highlighting
contractions, the economy recorded a the improved performance of the agriculture
positive performance in the second half of sector and based on available information,
2023 and a sustained recovery is expected this positive trend is expected to sustain during
in the period ahead. The economy is expected the remainder of the year, unless disrupted by

Figure
3.2 Projected Quarterly Real GDP Growth (year-on-year, %)
20

10

-10

Realised Projection

-20
21/IV 22/I II III IV 23/I II III IV 24/I II III IV 25/I II III IV

50% CI 70% CI 90% CI Realised Real GDP Growth

Note: A forecast is neither a promise nor a commitment
The projections reflect the available data, assumptions and judgements made at the forecast round in March 2024.
The fan chart illustrates the uncertainty surrounding the baseline projection path using confidence bands of gradually fading colours. The confidence intervals (CI) shown on the chart indicate the ranges of values within
which real GDP growth may fluctuate over the medium term. For example, the thick blue shaded area represents the 50 per cent confidence interval, implying that there is a 50 per cent probability that the realised real
GDP growth will be within this interval. The confidence bands show the increasing uncertainty in forecasting macroeconomic variables over a longer horizon. Given the volatile global environment and the uncertainties in
the domestic economy, the baseline forecasts are exposed to various potential upside and downside risks. Any notable change in the underlying assumptions and judgements could lead to the realised growth path deviating
from the projection.
Source: Central Bank Staff Projections

108
 MACROECONOMIC OUTLOOK

adverse weather conditions. The noteworthy be not only a drag on economic potential
rise in remittances also may support in boosting but also a source of economic vulnerability,
aggregate demand. The near term economic especially considering the rapidly evolving
growth trajectory is expected to be supported global environment. Further, focused initiatives
by the improved fiscal space that is envisaged to improve overall productivity and efficiency
with the completion of debt restructuring. across all key economic sectors are imperative
Expected gradual adjustment in wages would at this juncture. At the micro level, ongoing
also help improve demand. Notwithstanding initiatives to strengthen social safety nets, by
the renewed sense of macroeconomic stability, improving efficiency and adequate budgetary
policy certainty and continuity will remain allocations, must be expedited to build near
vital to the growth trajectory of the economy term resilience and enable individuals to seize
opportunities for economic empowerment and

3
during 2024, amid expected elections. External
demand for domestic services, particularly sustainable development in the period ahead.
through tourism, is expected to remain elevated While expenditure rationalisation is vital for
and some renewed demand for exports may fiscal sustainability, effectiveness of government
emerge if ongoing initiatives to strengthen spending on key social infrastructure, such as
exports materialise amid the improved growth health and education, should be enhanced to
prospects of Sri Lanka’s key trading partners ensure equitable provision of such services with
in the medium term. The economy’s positive the aim of sustaining long term growth. Further,
growth trajectory in the near and medium term timely implementation of identified measures to
continues to hinge on Sri Lanka’s continuation address governance weaknesses and corruption
of the IMF-EFF programme, timely completion vulnerabilities are macro-critical for the progress
of both the economy and its people.
of debt restructuring, and the Government’s
commitment to forge ahead with the structural
3.2.3 Monetary Sector Outlook
reform agenda. Freeing up resources through
these reforms, especially in relation to State Given the favourable inflation dynamics
Owned Business Enterprises (SOBEs) and and outlook, as reflected by available data,
rechannelling them into productive sectors can the monetary policy stance of the Central
help induce the long overdue improvements Bank is expected to remain accommodative
to productivity and further strengthen the in the period ahead, which would help
potential of the economy. However, a key stimulate economic activity. Supported by the
fragility in the economic recovery process monetary policy easing measures, improving
is the notable continued outflow of human domestic money market liquidity conditions
capital, especially highly skilled professionals, and the reduction in the risk premia attached
amidst adverse demographic developments to government securities, market interest rates,
with ageing. The rapidly materialising impact particularly lending interest rates, are expected
of climate change may also take a larger to normalise further providing the required
than expected toll in the near to medium term relief for businesses and households in terms
through frequent supply shocks, not only on of reduced financing costs. The expansionary
agricultural production but also on other aspects momentum observed in credit extended to
of the economy such as power generation, the private sector by the banking sector since
construction, and tourism, among others. The June 2023 is expected to continue supported
lack of economic diversification continues to by normalising lending interest rates and the

109
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

improvements in business sentiments, thereby incoming data. With the intention of enhancing
fuelling the envisaged rebound of domestic transparency, the Central Bank will continue
economic activity. Meanwhile, the banking to communicate its policies, the envisaged
sector’s exposure to the public sector is expected macroeconomic outcomes and the likely
to be lower than in previous years due to monetary policy actions and the rationale behind
the implementation of decisive fiscal reforms them, which will be instrumental in managing
along with the restoration of debt sustainability the expectations of the public, thus contributing
that would reduce the financing needs of the to achieving overall price and macroeconomic
Government. Further, the resumption of foreign stability. As a part of this process, the Central
financing from the multilateral development Bank will continue publishing the Monetary
partners and bilateral partners in the period Policy Report (MPR) bi-annually to better inform
ahead would reduce the Government’s the public on the outlook of the economy,

3
excessive reliance on domestic resources for thereby further improving the transparency of
debt financing, thus availing resources for use the monetary policy actions taken by the Central
by productive sectors of the economy. Credit Bank.
to SOBEs by the banking sector is expected to
record a moderate expansion, although the Preserving the independence of the Central
reliance of the key SOBEs on bank funding is Bank is imperative to ensure that the
likely to be low amidst the implementation of economy and its stakeholders continue to
cost-reflective pricing mechanisms. Similarly, reap the benefits of farsighted policies.
going forward, Net Credit to the Government The sharp disinflation and the return to a low
(NCG) by the banking system is expected to interest rate environment, achieved within a short
remain low, while the Central Bank of Sri Lanka period of time, are predominantly attributable
Act No. 16 of 2023 (CBA) prohibits any future to the independent and timely monetary policy
monetary financing. Net Foreign Assets (NFA) interventions by the Central Bank. Therefore,
of the banking system is expected to improve it is in the best interest of the economy and its
further in the period ahead with the envisaged stakeholders that such enhanced central bank
foreign currency inflows to the country and autonomy is preserved and any fiscal dominance
purchases of foreign exchange by the Central of monetary policy is prevented, going forward.
Bank from the domestic foreign exchange
market for building official reserves. With the 3.2.4 External Sector Outlook
envisaged expansion in domestic credit and the The external sector outlook for 2024 and
improvement in NFA, year-on-year growth of beyond will be contingent on the successful
broad money supply is expected to accelerate completion of External Debt Restructuring
to around 15.0 per cent in 2024 and record a (EDR) and the perseverance with the reform
moderate growth of around 10.0-11.0 per cent
path set out in the IMF-EFF supported
annually over the medium term in line with the
programme. These will be vitally important
envisaged expansion of the domestic economy
in eliminating the prevailing uncertainties
and medium term inflation target.
and sustainably improving global partners’
The monetary policy stance of the Central confidence in the country. The merchandise
Bank will continue to be data-driven and trade deficit is expected to widen in 2024 due
forward-looking. Timely adjustments to the to the possible increase in import demand,
policies and strategies of the Central Bank will reflecting the relaxation of import restrictions,
be made under the FIT framework, in line with improved economic activity, and increased

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 MACROECONOMIC OUTLOOK

BOX 7
Making Sri Lanka’s External Current Account Outcomes More Sustainable

Sri Lanka recorded a surplus in the current account levels. Sustaining these surpluses was supported by
of the Balance of Payments (BOP) in 2023. This policies aimed at gradually accelerating real GDP
surplus can mainly be attributed to the notable growth and improving fiscal performance (i.e.,
reduction in merchandise imports, significant improved primary balance and lower budget deficit).
increase in earnings from tourism and healthy In this context, it is important to explore the factors
growth in workers’ remittances. Over the years, influencing the sustainability of current account
Sri Lanka has been experiencing persistent external surpluses post-economic shocks and economic
current account deficits mainly driven by large implications of maintaining persistent current
deficits in the merchandise trade account. Although account surpluses or deficits.
the trade in services account and secondary income
The current account balance mirrors the

3
account recorded surpluses, such surpluses were not
sufficient to cushion the impact of merchandise trade savings-investment gap in the country. A current
and primary income account deficits on the current account surplus reflects a positive savings-investment
account (Figure B 7.1). gap whereas a deficit reflects a negative
savings-investment gap. In Sri Lanka, along with
Historically, global experiences show that after a the current account surplus, the national savings-
significant economic shock, such as a BOP crisis investment gap took an upturn to record a positive
leading to a debt default, the subsequent adjustment value in 2023. This surplus can be attributed to the
in the exchange rate and corrective policy measures combined effect of reduced domestic investment and
result in an immediate current account surplus. a notable increase in net current transfers from the
In this context, historical experiences show that rest of the world, leading to an increase in national
some countries were able to sustain a surplus in savings.
the current account in the medium to long term
following a period of economic distress. At the same Country Experiences
time, there were countries that reverted to their During the East Asian Financial Crisis of
historical trend of recording deficits (Figure B 7.2). 1997-1998, countries such as Thailand, South
Generally, countries that have been able to sustain Korea, Indonesia, Philippines and Malaysia
such surpluses in the long run were able to stabilise experienced BOP distress that led to a multitude
the exchange rate at an elevated level compared of macroeconomic shocks, including sharp
to that of pre-crisis level, supporting export depreciation of local currencies. In response, these
competitiveness, while managing inflation at lower countries implemented structural reforms, including

Figure
B 7.1 Composition of the Current Account: 1970 - 2023
15

10

0
% of GDP

-5

-10

-15

-20

-25
1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

Trade Balance Services (net) Primary Income (net) Secondary Income (net) Current Account Balance

Source: Central Bank of Sri Lanka

111
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

fiscal consolidation, strengthening the regulatory resilience post-crisis. Thailand transitioned from a
framework for the financial sector, adoption of fixed exchange rate regime to an independently
inflation targeting frameworks, implementation floating exchange rate regime post-crisis by
of export promotion policies, and reinforcing allowing its currency to float which facilitated
external buffers by transitioning to flexible exchange an adjustment in its external balances (Sharma
rate regimes (Wellisz 2022). As a result, these 2003). After achieving a current account surplus
economies were able to witness V-shaped recoveries in the aftermath of the crisis, Thailand was able to
characterised by large current account surpluses. maintain a current account surplus for decades by
However, only some countries were able to sustain adopting appropriate policy measures including the
these surpluses over the medium to long term. The promotion of services exports, particularly tourism.
persistent current account surpluses achieved by
these countries could be attributable to export led Although Indonesia was able to sustain the post-
growth strategies, diversification of export markets, crisis current account surpluses over a decade, the
and prudent macroeconomic management executed country started to record current account deficits

3
by these economies. For example, South Korea's since 2012 due to the sharp fall in commodity
export oriented growth policies and diversification prices adversely affecting Indonesia’s commodity
of export markets enabled it to maintain current exports (IMF 2016). Considering elsewhere in
account surpluses, contributing to its economic the world, Zambia encountered an external debt
Figure
B 7.2 Current Account Balance (as a percentage of GDP): Selected Countries

Thailand Indonesia
Asian Financial Crisis Asian Financial Crisis
(1997-1998) (1997-1998)
15 6

10 4

2
5
0
0
-2
-5 -4

-10 -6
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Argentina Mexico
Argentine Financial Crisis and Debt Default Mexican Debt Crisis
(1998-2001) (1982)
10 6
8 4
6
2
4
0
2
-2
0
-4
-2
-4 -6

-6 -8
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
2021
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

Ecuador Zambia
Ecuador Debt Crisis Ecuador Debt Crisis Zambian Debt Default
(1999) (2018) (2020)
8 15
6 10
4
5
2
0 0

-2 -5
-4
-10
-6
-15
-8
-10 -20
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022

1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
(Proj.)

Sources: World Bank, International Monetary Fund

112
 MACROECONOMIC OUTLOOK

crisis in 2020 resulting in a sharp exchange rate market, maintaining low and stable inflation, and
depreciation and BOP challenges. Although Zambia focusing on export promotion and diversification are
was able to experience temporary current account essential.
surpluses in the aftermath of the crisis, the current
account is estimated to have reverted to a deficit Conclusion
in 2023 due to a significant contraction in copper There is no agreement among academia or
exports and imports returning to high levels (IMF policymakers on an optimal level of current
2023). Similar experiences can be observed in the account balance or whether a country should
cases of Argentina, Mexico and Ecuador where maintain a persistent current account deficit or a
the current account deficits turned into surpluses surplus (Ghosh and Ramakrishnan 2006; Devadas
in the aftermath of the debt crises followed by debt and Loayza 2018; World Economic Forum 2023).
restructuring. However, these surpluses did not Neither a current account deficit nor a surplus
persist. Therefore, it is evident that countries have alone could be interpreted as favourable or
had mixed experiences with respect to sustaining unfavourable for an economy. A current account is

3
post-crises current account surpluses, depending on considered to be sustainable if external deficits do
a multitude of factors, including structural reforms, not necessitate an immediate change in monetary
diversification strategies, prudent macroeconomic or fiscal policy or do not result in a BOP crisis
management as well as the country’s ability to leading to a strain on the country’s international
withstand external vulnerabilities. reserve level or having adverse implications
on its ability to service external debt. Although
Are current account surpluses always good? recording a current account surplus is interpreted
A current account surplus may be considered as favourable for an economy which had recorded
favourable for the purpose of building up reserves. persistent deficits historically, a persistent current
However, a persistent surplus may lead to significant account surplus may reflect an undervalued
appreciation of the local currency which would currency so that it may subsequently necessitate
necessitate the Central Bank to intervene in the an appreciation of the country’s local currency
domestic foreign exchange market to avoid undue leading to a loss of trade competitiveness. In
appreciation of the currency to ensure maintenance conclusion, if Sri Lanka could adopt and maintain
of trade competitiveness. However, adopting such an appropriate policy mix with export promotion
practices for extended time periods may lead to and diversification, which would result in a stable
such countries being labelled as stereotypical exchange rate, lower inflation levels and gradual
“currency manipulators” who maintain their economic growth path, the country would be able
currencies undervalued, akin to an export subsidy, to maintain a sustainable current account balance
to boost their trade surpluses. Moreover, if the over the medium to long term.
current account surplus is achieved as a result of
References
low domestic demand or compressed imports due
1. Devadas S and Loayza N (2018) When is a Current Account Deficit Bad?, World
to restrictive trade policies, it can hinder domestic Bank Research and Policy Briefs No. 130415, World Bank.
consumption and investment affecting future 2. Ghosh A and Ramakrishnan U (2006) Do Current Account Deficits Matter?,
Finance and Development, 43:4, International Monetary Fund (IMF).
economic growth. In order to achieve a sustainable 3. IMF (2023) Zambia: Second Review Under the Arrangement Under the Extended
current account balance in the aftermath of an Credit Facility - Staff Report, IMF.
4. IMF (2016) 2015 Article IV Consultation - Press Release; Staff Report; and
economic crisis, adopting an appropriate policy Statement by the Executive Director for Indonesia, IMF Country Report No. 16/81,
mix is required while ensuring that there will be no IMF.
5. Sharma S (2003) The Asian Financial Crisis: Crisis, Reform and Recovery,
disruptive adjustments. In this regard, adopting a Manchester University Press.
flexible exchange rate policy, where the exchange 6. Wellisz C (2022) From the Asian Financial Crisis to Today, Finance and
rate is determined based on demand and supply Development, IMF.
7. World Economic Forum (2023) What is a country's current account balance, and is
conditions in the domestic foreign exchange a deficit good or bad for its economy?, World Economic Forum.

spending capacity of the public and businesses supported by the expected revival and expansion
due to easing monetary conditions, despite the of earnings from exports. The services account
expected moderate growth in export earnings in surplus is likely to increase in 2024 and beyond
2024. Even with the continued growth in import with the projected upswing in earnings from
expenditure, the trade deficit is expected to tourism as well as the envisaged improvement
reach manageable levels in the medium term, in competitiveness of other services exports.

113
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

Sri Lanka is likely to benefit from the booming projects are expected to enhance inflows to the
tourism industry in the medium term with the financial account while also strengthening gross
gradual normalisation of the global economy official reserves in 2024 and beyond. Further,
and continued strategic drive to reap the full the IMF-EFF supported programme is fully
potential of this sector. However, the expected financed with firm commitments of financing
surge in tourism should also accompany for 2024 and strong prospects for financing for
alignment with international standards and the rest of the programme period. Programme
sustainable tourism measures while ensuring that financing gaps up to 2027 are expected to be
estimated revenue is realised fully for the country fulfilled through debt restructuring and new
to reap the benefits. The services account surplus financing.
is also expected to strengthen over the medium
Moreover, non-debt creating foreign

3
term with the expected rebound in activities inflows to the financial account such as
in transport services and high growth in the FDI are expected to strengthen over the
Information Technology and Business Process medium term, particularly to the Colombo
Outsourcing (IT/BPO) services subsector. The Port City and Hambantota Industrial Zone.
deficit in the primary income account is expected Proposed improvements to the institutional
to narrow in 2024 after the completion of the arrangement for investment promotion and
EDR process and the subsequent scale down of efforts to address longstanding issues on doing
interest payments. The primary income account business conditions are expected to alleviate
deficit is expected to widen thereafter over the any negative perceptions of Sri Lanka among
medium term due to continued interest and investors. Foreign investments in the government
dividend payments. Workers’ remittances are securities market and in the Colombo Stock
expected to continue to remain at elevated Exchange (CSE) are also expected to strengthen
levels in 2024 and beyond. Consequently, the over the medium term due to the above
current account, which recorded a surplus in developments. The Central Bank remains
2023, is expected to record a surplus in 2024 committed to maintaining a market determined
as well, but at a lower level. During the medium and flexible exchange rate and building reserves
term, the current account deficit is expected to through net purchases of foreign exchange
be maintained at sustainable levels following from the domestic foreign exchange market
the restoration of debt sustainability and the which are expected to serve as a buffer against
anticipated adoption of policies in favour of the external shocks. Moreover, any intervention
tradeable sector. The exchange rate will act as in the domestic foreign exchange market by
a stabiliser in the context of any large trade or the Central Bank would be limited only for the
current account imbalances. purposes of reserve buildup and curtailing
any excessive short term volatility in the
Inflows to the financial account are
exchange rate.
expected to be supported by positive
investor sentiments owing to the successful
3.2.5 Financial Sector Outlook
continuation of the IMF-EFF programme
and debt restructuring process. Also, The financial sector, which navigated
foreign financing assistance from multilateral through challenging macro-financial
agencies such as the IMF, Asian Development conditions during recent years showed
Bank (ADB), and the World Bank along with signs of recovery and stabilisation in
the envisaged resumption of bilateral funding 2023 and the resilience of the financial

114
 MACROECONOMIC OUTLOOK

sector is expected to improve further impact through pre-emptive policy interventions

with the dissipation of macroeconomic and behavioural responses. The banking sector
vulnerabilities in the period ahead. Fragilities is formulating comprehensive recapitalisation
and uncertainties in the financial sector that plans for its top tier domestic Licensed
surfaced warranted the Central Bank to Commercial Banks (LCBs) with the view of
take a range of policy measures and initiate strengthening the resilience to enable a smooth
structural reforms to maintain and strengthen sovereign debt restructuring while averting the
the resilience of the economy and the financial transmission of negative spillovers across the
sector. With the easing of monetary conditions economy. The credit growth of the Licensed
as reflected through downward interest rate Finance Companies (LFCs) sector is expected
movement and dissipating the uncertainty to resemble a trajectory similar to that of the
priced in interest rates, credit to the private banking sector with continued diversification

3
sector is expected to rebound in 2024 from the
amidst limited growth opportunities for
contraction it registered in 2023. Banks are
conventional loan products. The credit risk in
expected to rebalance the asset allocation with
the LFCs sector is expected to ease with the
the normalising yield curves on government
envisaged recovery in macro-financial conditions
securities, which were once inverted, and the
and credit rebound.
correction of the anomaly in the risk-free rates
being higher than the lending rates. With the An array of structural, legal and policy level
probable restructuring of the Government’s reforms and innovations will continue to
foreign currency loans, which may entail an be mobilised to ensure the stability of the
exchange of sovereign loans with sovereign financial system. Consolidation endeavours
securities, the impending EDR may result are expected to continue in 2024, enhancing
in a one-off dip in financial intermediation the resilience and efficiency of the LFCs sector.
due to a contraction in the loan book, albeit A robust growth in digital transactions is
partially correcting the tilt towards lending to
expected in the landscape of payments and
the sovereign. Measures are underway through
settlements due to increased transactions
moral suasion and appropriate regulations to
through Instant Payment System facilitated by
address key elements of sovereign-bank nexus.
online banking and mobile payment apps.
Reflecting the gradual revival of economic
Awareness campaigns on digital transaction
activities, the expected easing of strained
methods will be conducted to increase the
borrower capacities and the correction in market
uptake of digital payments by customers and
interest rates, credit to the private sector is
expected to gather momentum. The envisaged merchants. The Central Bank will closely
credit growth and the gradual easing of collaborate with financial institutions to support
trade-related restrictions and improving the expansion of safe, efficient and reliable
repayment capacities are expected to improve digital payment mechanisms in the country. The
the credit quality of the banking sector. Liquidity Central Bank as the Macroprudential Authority
levels of the banks are expected to improve of the country envisages to implement its suite
with the envisaged EDR as net foreign currency of macroprudential tools when the need arises
credit to the sovereign and illiquid foreign to contain systemic imbalances with the view
currency sovereign instruments are likely to be of maintaining financial sector resilience and
exchanged with liquid sovereign instruments. The to support the smooth provision of financial
Government endeavours to achieve a smooth services even under adverse economic and
EDR operation with minimal macro-financial financial conditions.

115
 CENTRAL BANK OF SRI LANKA | ANNUAL ECONOMIC REVIEW 2023

The instigation and timely implementation if implemented as scheduled. Revenue

of well sequenced-consistent policies are enhancement in the forthcoming periods is
expected to ensure the stability of the also expected through the strengthening of
financial system. The continued advancement revenue administration measures. Compulsory
along the policy reform agenda envisaged in registration of individuals for personal income
the IMF-EFF programme is expected to address taxes, strengthening of large taxpayers and high
the shortfalls and weaknesses of the financial wealth taxpayers units, upgrading the Revenue
sector and to further strengthen the resilience Administration and Management Information
and confidence in the system. Despite all such System (RAMIS), and the abolishment of the
efforts, if political uncertainties exert significant Simplified Value Added Tax (SVAT) system are
pressure on the reform agenda going forward, expected to improve revenue administration
which could lead to departure from the intended efforts of revenue collecting agencies.

3
policy reform trajectory, it may result in adverse Recent efforts by the Government mandating
and potentially irreversible impacts on both the information sharing by the financial institutions,
financial system and the economy. CSE, Registrar General’s Department, Registrar
General of Companies and Department
3.2.6 Fiscal Sector Outlook of Motor Traffic with the Inland Revenue
Department, is a welcoming move to build
The Government is expected to continue
interlinkages with government institutions and the
the fiscal consolidation path and its efforts
revenue authority to improve tax administration
to restore debt sustainability in line with the
and minimise tax evasion. However, any reversal
IMF-EFF supported programme, showcasing
of hard earned fiscal sector achievements prior
the Government’s commitment to prudent
to or after the upcoming elections will derail the
fiscal management and implementation of
IMF programme and destabilise the economy,
long overdue structural reforms. As per the
thereby triggering a deeper socioeconomic and
revised Medium Term Macro Fiscal Framework political crisis than that was observed in 2022.
(MTMFF) outlined in the Fiscal Management Additionally, the Government aims to manage
Report 2024, the Government aims to achieve expenditure within 20 per cent of GDP over the
an ambitious revenue target, surpassing 15 medium term. While streamlining government
per cent of GDP by 2027. Simultaneously, expenditure, making appropriate allocations to
efforts are directed towards containing the priority areas such as health, education, public
overall budget deficit to below 5 per cent of transport, and social protection, as outlined
GDP starting from 2026, while striving to in MTMFF, is pivotal for equitable and faster
achieve a primary surplus of at least 2.3 economic recovery. The implementation of
per cent of GDP by 2025 and beyond. Aligned the new legislations related to Public Financial
with this stance, the Government implemented Management and Public Procurement is
robust revenue enhancement measures since expected to strengthen fiscal discipline through
mid-2022, and the impact of these fiscal policy the establishment of a framework of fiscal
reforms has been reflected in the Government's rules, enhanced transparency, monitoring
finances since 2023, resulting in a significant mechanisms, and stricter discipline on
increase in tax revenue collection. Furthermore, government procurement. In addition, the
the envisaged introduction of a property tax as Government is implementing a stringent project
well as a gift and inheritance tax, is expected appraisal and prioritisation process with regard
in 2025, further augmenting tax collection to capital projects to align capital expenditure

116
 MACROECONOMIC OUTLOOK

with development priorities in a cost effective the possibility of SOBE losses translating into
manner. At the same time, the transfer of public government debt. Continuation of such policies,
debt management to a separate Public Debt along with ongoing SOBE reforms, including
Management Office (PDMO) is expected with the divestment of non-strategic SOBEs, are
the implementation of a new debt management anticipated to reduce the burden they exert
law. on the Budget. Furthermore, the publication
of details regarding procurement contracts,
Meanwhile, the debt restructuring disclosure of certain tax exemption information
process continues to progress, guided by in the public domain, and the appointment of
quantitative targets established under the Commissioners to the Commission to Investigate
IMF Sovereign Risk and Debt Sustainability Allegations of Bribery or Corruption (CIABOC)
Framework (SRDSF), while simultaneous are commendable steps towards enhancing

3
efforts are underway to tackle longstanding transparency, increasing accountability, and
issues of SOBE reforms and address other addressing bribery concerns. The publication
corruption and transparency vulnerabilities. of the Government Action Plan, derived from
In this regard, the Government completed key recommendations in the recently concluded
aspects of the Domestic Debt Optimisation Governance Diagnostic Assessment by the IMF,
(DDO) operation in 2023 to complement the offers transparency and details progress of
foreign debt restructuring efforts and meet these recommendations. Successful completion
debt sustainability targets. The completion of of these recommendations will strengthen
the restructuring of the foreign debt portfolio public and civil sector confidence in good
and adherence to the fiscal consolidation path governance, essential for preventing Sri Lanka
that the Government has committed under the from becoming a failed state. Concerted efforts
IMF-EFF programme are expected to bring by the Government, supported by domestic
down the debt trajectory to a sustainable and foreign stakeholders, are expected to
level in the medium term. In the meantime, address the challenges in the fiscal sector and
the implementation of cost reflective pricing implement broad based economic reforms,
mechanisms helped alleviate the longstanding thereby restoring fiscal sector sustainability in the
financial stresses experienced by SOBEs, limiting medium term.

117
 STATISTICAL APPENDIX1

Table No.

1. REAL SECTOR 1-5

2. EXTERNAL SECTOR 6 - 14

3. FISCAL SECTOR 15 - 16

4. MONETARY AND FINANCIAL SECTOR 17 - 19

1
The online version of the Statistical Appendix is availabale in Excel spreadsheet format and
contains additional data.

Path - Main Menu  Publications  Economic and Financial Reports  Annual Economic Review  Annual
Economic Review 2023  Statistical Appendix
 WEIGHTS AND MEASURES
Conversion Factors

British to Metric Units

1 acre = 0.405 hectares (ha)
1 pound (lb) = 0.454 kilogrammes (kg)
1 long ton (2,240 lbs) = 1.016 metric tons (mt)
1 hundred weight (cwt) = 50.802 kg
1 mile = 1.609 kilometres (km)
1 long ton mile = 1.635 mt km
1 lb/acre = 1.121 kg/ha
1 cwt/acre = 125.535 kg/ha
1 imperial pin = 0.568 litres
1 imperial gallon = 4.55 litres

Metric to British Units

1 hectare = 2.471 acres
1 kilogram = 2.205 lbs
1 mt (1,000 kg) = 0.984 long ton
1 metre = 3.281 feet
1 kilometre = 0.612 mile
1 mt kilometre = 0.612 long ton mile
1 litre = 1.76 imp. pints = 0.220 imp. gallons
1 kg/ha = 0.892 lb/acre

Paddy/Rice Conversions
1 bushel of paddy (46 lbs) = 20.87 kg
1 mt paddy = 47.92 bushels paddy
= 0.7 mt rice
1 mt rice = 68.46 bushels paddy
= 1.43 mt paddy
1 bushel paddy/acre = 51.55 kg paddy/ha

Coconut and Coconut Product Conversions

1 mt of desiccated coconut = 8,960 nuts
1 mt of coconut oil = 9,250 nuts
1 mt of copra = 5,500 nuts
1 mt of coconut milk = 4,000 nuts
REAL SECTOR TABLE 1

Rs.million

Current Market Prices Constant (2015) Prices

Economic Activity
2021 (b) 2022 (b)(c) 2023 (c) 2021 (b) 2022 (b)(c) 2023 (c)
Production Approach

Cultivation of Crops 1,092,133 1,367,845 1,423,553 644,773 619,434 641,080

Animal production 169,970 258,931 386,121 94,039 83,322 84,812
Forestry & logging, plant propagation and agricultural supporting activities 98,006 143,234 160,305 74,181 84,958 81,518
Fishing 188,007 274,710 318,041 137,555 123,128 126,839
Mining & quarrying 355,214 450,745 400,852 287,969 198,612 154,291
Manufacturing of food, beverages & tobacco products 1,097,498 1,704,133 1,924,359 1,014,150 869,373 899,777
Manufacturing of textile, wearing apparel & leather products 953,158 1,516,831 1,433,732 473,911 511,863 450,498
Other manufacturing 1,113,427 1,508,296 1,592,902 759,090 581,223 550,106
Electricity generation, water supply and sewerage 184,103 71,461 298,262 230,014 220,187 213,563
Construction 1,572,211 1,921,624 1,421,045 1,172,761 927,321 734,859
Wholesale and retail trade 2,254,632 3,344,708 3,863,407 1,675,083 1,675,534 1,677,928
Transportation and storage 1,644,942 2,644,080 3,633,369 1,344,119 1,384,459 1,438,759
Accommodation and food service activities 164,560 350,895 517,732 130,743 166,030 209,140
Information and communication 475,127 575,547 559,248 418,083 416,328 361,295
Financial and insurance activities 1,120,638 1,687,303 2,165,247 744,764 608,635 576,239
Real estate activities, and Professional, scientific, technical, administration and 1,203,953 1,461,518 1,714,004 932,460 802,924 775,825
support service activities
Public administration, defense, education, human health and social work activities 1,770,239 1,947,566 2,055,478 1,172,791 1,169,143 1,162,374
Other services (excluding own-services) 1,206,712 1,708,257 2,048,824 992,662 995,154 998,877
Gross Value Added (GVA) at Basic Price 16,664,532 22,937,682 25,916,480 12,299,149 11,437,626 11,137,782
Taxes less subsidies on products 947,839 1,126,080 1,713,185 826,356 723,576 743,954
Gross Domestic Product (GDP) at Market Price 17,612,370 24,063,762 27,629,665 13,125,505 12,161,201 11,881,736

Expenditure Approach

Consumption Expenditure 12,443,651 18,038,220 21,051,610 9,297,802 9,279,727 9,078,316

Private 10,779,024 16,310,959 19,158,507 7,959,371 7,922,720 7,795,132
Government 1,664,627 1,727,261 1,893,103 1,338,431 1,357,007 1,283,184
Gross Capital Formation 6,469,768 6,883,029 6,990,752 4,627,584 2,872,361 2,644,879
Gross Domestic Expenditure at Market Price 18,913,420 24,921,249 28,042,363 13,925,386 12,152,088 11,723,195
Export of Goods and Services 2,980,263 5,187,912 5,634,247 2,159,760 2,380,525 2,649,808
Import of Goods and Services 4,281,313 6,045,399 6,046,945 2,959,641 2,371,412 2,491,267
Gross Domestic Product (GDP) at Market Price 17,612,370 24,063,762 27,629,665 13,125,505 12,161,201 11,881,736

Income Approach

Compensation of Employees 4,846,606 6,204,469 6,159,055 3,421,335 3,382,269 2,981,040

Gross Operating Surplus 5,806,619 8,116,619 9,833,760 4,335,046 3,737,065 3,838,854
Net Operating Surplus 5,008,924 7,148,973 8,739,599 3,708,116 3,143,429 3,278,404
Consumption of Fixed Capital 797,695 967,327 1,094,161 626,930 593,636 560,449
Gross Mixed Income 5,967,807 8,560,202 9,741,337 4,503,363 4,281,197 4,235,566
Net Mixed Income 5,698,277 8,209,465 9,359,281 4,308,378 4,112,656 4,073,869
Consumption of Fixed Capital 269,530 350,737 382,056 194,985 168,542 161,697
Other taxes less subsidies on production 43,500 56,711 182,329 39,405 37,094 82,322
Gross Value Added (GVA) at Basic Price 16,664,532 22,937,682 25,916,480 12,299,149 11,437,626 11,137,782
Taxes less subsidies on products 947,838 1,126,080 1,713,185 826,356 723,575 743,954
Gross Domestic Product (GDP) at Market Price 17,612,370 24,063,762 27,629,665 13,125,505 12,161,201 11,881,736

(a) Based on the GDP estimates (base year 2015) Sources: Department of Census and Statistics
(b) Revised Central Bank of Sri Lanka
(c) Provisional
 REAL SECTOR TABLE 2
Population, Labour Force and Foreign Employment
Item 2019 2020 2021 2022 2023 (a)

Demography
Mid-Year Population, ‘000 (b) 21,803 21,919 22,156 22,181 22,037

Male 10,556 10,613 10,727 10,740 10,670

Female 11,247 11,306 11,429 11,441 11,367

Growth of mid-year Population, % 0.6 0.5 1.1 0.1 -0.6

Density of Population, Persons per Sq.Km. 348 350 353 354 351

Labour Force Trends (c)

Labour Force, ‘000 8,592 8,467 8,553 8,547 8,408

Labour Force Participation Rate (d) 52.3 50.6 49.9 49.8 48.6

By Gender
Male 73.0 71.9 71.0 70.5 68.6

Female 34.5 32.0 31.8 32.1 31.3

Status of Employment
Public Sector Employees 14.9 14.8 15.2 15.2 14.6

Private Sector Employees 43.0 42.7 42.0 42.8 44.5

Employers 2.6 2.5 2.7 3.0 2.6

Self Employed 32.5 33.2 33.4 33.0 32.8

Unpaid Family Workers 7.0 6.8 6.6 6.0 5.5

Total 100.0 100.0 100.0 100.0 100.0

Employment by Economic Activity (e)

Agriculture 25.3 27.1 27.3 26.5 26.1

Industry 27.6 26.9 26.0 26.5 25.5

Services 47.1 46.0 46.7 47.0 48.4

Unemployment, % of Labour Force 4.8 5.5 5.1 4.7 4.7

By Gender

Male 3.3 4.0 3.7 3.7 3.6

Female 7.4 8.5 7.9 6.5 7.0

Youth Unemployment (age 15-24 years) 21.5 26.5 26.5 22.8 23.0

Foreign Employment

Total Placements 203,087 53,711 122,264 311,056 297,656

By Gender

Males (%) 60.2 60.5 66.3 60.1 55.3

Females (%) 39.5 33.7 39.9 44.7

39.8
By Manpower Category

Skilled Labour (%) 74.8 74.0 74.1 66.1 70.1

Low Skilled Labour (%) 25.2 26.0 25.9 33.9 29.9

(a) Provisional Sources: Registrar General’s Department

(b) Data are based on the Censes of Population and Housing - 2012 Department of Census and Statistics
(c) Household Population aged 15 years and above Sri Lanka Bureau of Foreign Employment
(d) Labour force as a percentage of household population
(e) Based on the International Standerd Industrial Classification (ISIC) - Revision 4
REAL SECTOR TABLE 3
Colombo Consumer Price Index (CCPI, 2021 = 100)
Index Month-on-Month Percentage Change Year-on-Year Percentage Change
Period
CCPI CCPI (Core) CCPI CCPI (Core) CCPI CCPI (Core)
2023 January 188.6 172.4 0.5 0.5 - -
February 189.5 172.3 0.5 -0.1 50.6 43.6
March 195.0 171.9 2.9 -0.2 50.3 39.1
April 192.3 171.5 -1.4 -0.2 35.3 27.8
May 192.3 171.0 0.0 -0.3 25.2 20.3
June 192.3 169.9 0.0 -0.6 12.0 9.8
July 190.2 170.4 -1.1 0.3 6.3 5.9
August 190.1 171.2 -0.1 0.5 4.0 4.6
September 191.8 172.0 0.9 0.5 1.3 1.9
October 191.4 172.4 -0.2 0.2 1.5 1.2
November 193.4 172.4 1.0 0.0 3.4 0.8
December 195.1 172.5 0.9 0.1 4.0 0.6
Source: Department of Census and Statistics

TABLE 4

National Consumer Price Index (NCPI, 2021 = 100)

Index Month-on-Month Percentage Change Year-on-Year Percentage Change
Period
NCPI NCPI (Core) NCPI NCPI (Core) NCPI NCPI (Core)
2023 January 201.8 189.8 0.7 1.0 53.2 52.0
February 204.1 189.4 1.1 -0.2 53.6 50.1
March 204.8 188.1 0.3 -0.7 49.2 44.2
April 202.7 188.2 -1.0 0.1 33.6 31.8
May 203.1 187.8 0.2 -0.2 22.1 21.6
June 203.3 186.5 0.1 -0.7 10.8 11.3
July 201.9 188.0 -0.7 0.8 4.6 6.3
August 201.9 188.7 0.0 0.4 2.1 4.1
September 203.5 189.0 0.8 0.2 0.8 1.7
October 203.6 189.2 0.0 0.1 1.0 0.6
November 206.0 189.3 1.2 0.1 2.8 0.8

December 208.8 189.7 1.4 0.2 4.2 0.9

Source: Department of Census and Statistics
REAL SECTOR TABLE 5
Wage Rate Indices
Index Annual Average Percentage Change
Nominal Real (a) Nominal Real (a)
Public Sector Employees’ Wage Rate Index (2016=100) (b)
2020 114.6 94.8 9.2 2.9
2021 114.6 88.7 0.0 -6.4
2022 133.1 70.5 16.1 -20.6
2023 (c) 133.1 58.1 0.0 -17.5

Formal Private Sector Employees’ Minimum Wage Rate Index (December 1978=100) (d)
2020 4,282.0 88.8(e) 0.2 -4.2
2021 7,469.5 146.0(e) 74.4 64.3
2022 8,198.6 112.9(e) 9.8 -22.7
2023 (c) 8,232.9 93.0(e) 0.4 -17.6

Informal Private Sector Employees’ Wage Rate Index (2018=100) (f)

2020 112.7 102.6 6.4 0.2
2021 123.1 104.7 9.2 2.0
2022 153.3 88.3 24.5 -15.7
2023 (c) 170.8 82.0 11.4 -7.1

(a) Based on NCPI (2013=100)

(b) Public sector wage rate index was rebased to 2016 (from 2012) in order to capture the changes introduced to public sector salary structure by the Public Administration
Circular No. 03/2016 issued by the Ministry of Public Administration and Management on 25 February 2016. The data relating to the base period employment structure
was obtained from the Census of Public and Semi Government Sector Employment conducted by the Department of Census and Statistics in November 2016.
(c) Provisional
(d) The Index numbers are calculated on fixed weights based on the numbers employed as at 31 December 1978. The wage rates used in the calculation of Index Numbers
are minimum wages for different trades fixed by the Wage Boards.
(e) Based on CCPI (2006/07=100)
(f) Informal private sector wage rate index was rebased to 2018 (from 2012) in order to capture the recent changes occurred in the informal private sector wages and the
employment structure.The Index numbers are calculated using wages data of informal private sector collected through the Country Wide Data Collection System. Base
period employment structure was derived from the Quarterly Labour Force Survey conducted by the DCS in 2018.
EXTERNAL SECTOR TABLE 6

Composition of Exports
Value in US$ million
2023 (a) Change (%)
Category 2019 2020 2021 2022
Value Share (%) 2022/2023
Agricultural Exports 2,461.9 2,336.2 2,729.5 2,568.0 2,566.5 21.5 -0.1
Tea 1,346.4 1,240.9 1,324.4 1,258.8 1,309.9 11.0 4.1
Spices 312.5 333.5 454.8 368.7 392.9 3.3 6.5
Coconut 329.5 345.2 425.2 400.3 336.8 2.8 -15.9
Seafood 262.5 189.8 274.1 269.0 262.2 2.2 -2.5
Minor Agricultural Products 120.0 134.7 148.8 178.8 180.9 1.5 1.2
Unmanufactured Tobacco 34.7 25.5 31.6 24.4 28.1 0.2 15.3
Rubber 24.2 30.1 42.2 41.4 28.0 0.2 -32.2
Vegetables 32.0 36.6 28.5 26.7 27.7 0.2 3.8
Industrial Exports 9,426.3 7,672.0 9,702.0 10,465.3 9,277.7 77.9 -11.3
Textiles and Garments 5,596.5 4,423.1 5,435.1 5,952.0 4,878.9 41.0 -18.0
Rubber Products 866.1 786.1 1,050.4 977.0 902.2 7.6 -7.7
Machinery and Mechanical Appliances 400.0 337.5 500.9 580.9 598.2 5.0 3.0
Petroleum Products 521.1 373.6 506.4 568.0 539.4 4.5 -5.0
Food, Beverages and Tobacco 447.0 464.0 586.9 519.5 539.3 4.5 3.8
Gems, Diamonds and Jewellery 305.7 181.5 276.7 450.6 500.0 4.2 11.0
Chemical Products 176.3 172.7 223.2 223.5 193.5 1.6 -13.4
Base Metals and Articles 176.5 110.9 156.4 176.7 178.3 1.5 0.9
Transport Equipment 145.9 71.4 148.2 129.3 149.3 1.3 15.4
Animal Fodder 129.0 102.9 149.4 170.5 145.6 1.2 -14.6
Wood and Paper Products 129.4 99.3 129.9 136.9 114.0 1.0 -16.7
Leather, Travel Goods and Footwear 102.9 53.9 58.4 85.8 71.2 0.6 -17.0
Plastics and Articles Thereof 73.5 176.3 78.6 60.9 56.3 0.5 -7.6
Printing Industry Products 48.3 47.9 50.0 53.1 55.1 0.5 3.9
Ceramic Products 30.1 24.0 37.4 38.1 34.0 0.3 -10.7
Other Industrial Exports 278.1 247.0 314.1 342.4 322.5 2.7 -5.8
Mineral Exports 33.9 25.1 44.5 50.0 38.5 0.3 -23.1
Unclassified 17.9 14.1 22.6 23.2 28.0 0.2 20.8
Total Exports 11,940.0 10,047.4 12,498.6 13,106.4 11,910.7 100.0 -9.1
(a) Provisional Sources: Ceylon Petroleum Corporation and Other Exporters of Petroleum
National Gem and Jewellery Authority
Sri Lanka Customs
Central Bank of Sri Lanka
EXTERNAL SECTOR TABLE 7

Composition of Imports
Value in US$ million
2023 (a) Change (%)
Category 2019 2020 2021 2022
Value Share (%) 2022/2023

Consumer Goods 3,956.5 3,401.7 3,848.7 2,813.0 3,043.9 18.1 8.2

Food and Beverages 1,426.9 1,554.4 1,666.5 1,607.9 1,693.0 10.1 5.3
Sugar and Confectionery 201.2 277.1 288.8 257.8 435.5 2.6 68.9
Vegetables (b) 310.0 352.9 384.3 318.4 358.6 2.1 12.6
Dairy Products 311.9 333.8 317.7 225.3 273.7 1.6 21.5
Oils and Fats 29.4 106.9 184.1 43.9 133.9 0.8 205.2
Spices 115.4 126.9 127.2 136.6 133.4 0.8 -2.4
Cereals and Milling Industry Products 36.1 33.6 97.4 430.5 116.9 0.7 -72.8
Seafood 214.6 188.6 122.3 66.4 79.4 0.5 19.6
Other Food and Beverages 208.4 134.7 144.7 128.9 161.6 1.0 25.3
Other Consumer Goods 2,529.6 1,847.3 2,182.2 1,205.1 1,350.9 8.0 12.1
Medical and Pharmaceuticals 552.6 595.5 882.5 533.4 667.0 4.0 25.0
Clothing and Accessories 275.1 200.7 221.3 215.6 170.0 1.0 -21.1
Household and Furniture Items 171.9 146.9 161.2 116.3 122.1 0.7 5.0
Telecommunication Devices 247.2 268.4 382.9 69.0 98.8 0.6 43.3
Home Appliances 206.6 174.2 257.1 85.5 72.4 0.4 -15.4
Personal Vehicles 815.7 282.9 12.8 11.7 27.7 0.2 136.9
Other Non-Food Consumables 260.5 178.7 264.4 173.7 192.9 1.1 11.1
Intermediate goods 11,369.6 9,076.5 12,308.9 12,438.8 11,006.6 65.5 -11.5
Fuel 3,891.6 2,542.6 3,742.9 4,896.8 4,702.6 28.0 -4.0
Crude Oil 970.7 583.0 625.1 483.8 1,137.5 6.8 135.1
Refined Petroleum 2,706.4 1,742.2 2,840.0 4,048.2 3,095.4 18.4 -23.5
Coal 214.6 217.3 277.8 364.8 469.8 2.8 28.8
Textile and Textile Articles 2,909.4 2,335.1 3,066.9 3,065.2 2,371.2 14.1 -22.6
Chemical Products 831.5 831.5 1,074.4 966.2 814.7 4.8 -15.7
Plastic and Articles Thereof 612.9 540.2 765.7 650.8 474.6 2.8 -27.1
Paper and Paperboard and Articles Thereof 457.3 383.1 468.9 465.9 412.4 2.5 -11.5
Wheat and Maize 346.4 384.4 418.3 303.1 338.2 2.0 11.6
Base Metals 562.8 460.3 866.4 323.2 313.8 1.9 -2.9
Diamonds and Precious or Semi stones 201.4 117.2 143.6 203.8 268.4 1.6 31.7
Fertiliser 221.4 258.9 158.2 275.9 235.0 1.4 -14.8
Agricultural Inputs 187.9 200.8 264.2 214.5 233.8 1.4 9.0
Vehicle and Machinery Parts 270.1 239.4 349.4 254.9 232.5 1.4 - 8.8
Rubber and Articles Thereof 238.9 218.7 400.7 334.7 200.2 1.2 -40.2
Food Preparations 227.7 235.1 269.9 189.7 171.3 1.0 -9.7
Mineral Products 243.3 168.9 158.9 123.7 80.9 0.5 -34.6
Other Intermediate Goods 167.0 160.3 160.4 170.4 156.9 0.9 -7.9
Investment Goods 4,602.6 3,563.2 4,462.7 3,030.5 2,744.6 16.3 -9.4
Machinery and Equipment 2,489.7 2,176.1 2,809.5 1,969.0 1,867.6 11.1 -5.1
Building Materials 1,508.7 1,035.6 1,248.9 926.3 775.1 4.6 -16.3
Transport Equipment 596.6 348.3 398.5 132.1 98.5 0.6 -25.4
Other Investment Goods 7.6 3.2 5.8 3.0 3.3 ... 9.2
Unclassified Imports 8.3 14.0 17.1 8.8 16.0 0.1 82.9
Total Imports 19,937.1 16,055.4 20,637.4 18,291.0 16,811.1 100.0 -8.1
Non Oil Imports 16,045.4 13,512.8 16,894.6 13,394.2 12,108.5 72.0 -9.6
(a) Provisional Sources: Ceylon Petroleum Corporation
(b) Includes lentils, onions, potatoes, leguminous and other vegetables Lanka IOC PLC
Sri Lanka Customs
Central Bank of Sri Lanka
 TABLE 8
EXTERNAL SECTOR
Direction of Trade - Exports (a)
Value in US$ million
2019 2020 2021 2022 2023 (b)
Countries
Value Share (%) Value Share (%) Value Share (%) Value Share (%) Value Share (%)
Largest Export Destinations in 2023
United States 3,141 26.3 2,500 24.9 3,108 24.9 3,321 25.3 2,769 23.2
India 768 6.4 606 6.0 829 6.6 860 6.6 853 7.2
United Kingdom 998 8.4 908 9.0 938 7.5 963 7.3 849 7.1
Italy 528 4.4 455 4.5 581 4.6 641 4.9 675 5.7
Germany 648 5.4 570 5.7 758 6.1 742 5.7 589 4.9
United Arab Emirates 276 2.3 190 1.9 287 2.3 355 2.7 364 3.1
Netherlands 301 2.5 290 2.9 426 3.4 428 3.3 343 2.9
France 191 1.6 184 1.8 252 2.0 249 1.9 304 2.5
Canada 241 2.0 213 2.1 316 2.5 361 2.8 294 2.5
China 240 2.0 225 2.2 277 2.2 255 1.9 279 2.3

Other Export Destinations

Australia 200 1.7 175 1.7 260 2.1 256 2.0 228 1.9
Austria 44 0.4 33 0.3 44 0.4 51 0.4 45 0.4
Azerbaijan 56 0.5 53 0.5 49 0.4 69 0.5 51 0.4
Bangladesh 162 1.4 153 1.5 222 1.8 211 1.6 174 1.5
Belgium 356 3.0 295 2.9 341 2.7 310 2.4 223 1.9
Brazil 57 0.5 43 0.4 60 0.5 65 0.5 73 0.6
Chile 40 0.3 55 0.5 56 0.4 46 0.4 47 0.4
Hong Kong 135 1.1 108 1.1 179 1.4 168 1.3 173 1.4
Indonesia 41 0.3 35 0.3 49 0.4 50 0.4 50 0.4
Iran 112 0.9 79 0.8 78 0.6 82 0.6 43 0.4
Iraq 126 1.1 110 1.1 177 1.4 156 1.2 129 1.1
Ireland 84 0.7 60 0.6 75 0.6 96 0.7 81 0.7
Israel 119 1.0 103 1.0 234 1.9 189 1.4 180 1.5
Japan 283 2.4 188 1.9 227 1.8 231 1.8 190 1.6
Jordan 35 0.3 37 0.4 47 0.4 62 0.5 88 0.7
Kenya 24 0.2 25 0.2 40 0.3 44 0.3 44 0.4
Libya 46 0.4 29 0.3 47 0.4 42 0.3 42 0.4
Malaysia 48 0.4 57 0.6 74 0.6 66 0.5 62 0.5
Maldives 114 1.0 78 0.8 103 0.8 106 0.8 113 0.9
Mexico 161 1.3 135 1.3 205 1.6 190 1.4 183 1.5
Norway 17 0.1 16 0.2 22 0.2 29 0.2 36 0.3
Pakistan 82 0.7 74 0.7 92 0.7 78 0.6 74 0.6
Poland 67 0.6 64 0.6 81 0.7 72 0.5 62 0.5
Russia 167 1.4 163 1.6 152 1.2 139 1.1 144 1.2
Saudi Arabia 86 0.7 76 0.8 76 0.6 98 0.7 99 0.8
Singapore 120 1.0 93 0.9 101 0.8 131 1.0 123 1.0
South Africa 41 0.3 33 0.3 41 0.3 35 0.3 39 0.3
South Korea 75 0.6 71 0.7 80 0.6 82 0.6 75 0.6
Spain 69 0.6 70 0.7 93 0.7 101 0.8 89 0.8
Sweden 73 0.6 74 0.7 108 0.9 111 0.8 97 0.8
Switzerland 106 0.9 91 0.9 146 1.2 147 1.1 169 1.4
Syria 55 0.5 45 0.5 38 0.3 34 0.3 43 0.4
Thailand 101 0.8 39 0.4 62 0.5 62 0.5 62 0.5
Turkey 210 1.8 208 2.1 178 1.4 120 0.9 196 1.6
Vietnam 79 0.7 37 0.4 63 0.5 47 0.4 37 0.3
Other 1,016 8.5 901 9.0 826 6.6 1,154 8.8 1,028 8.6

European Union (EU)(c) 3,552 29.8 3,177 31.6 2,967 23.7 3,035 23.2 2,718 22.8
Asian Clearing Union (ACU) (d) 1,252 10.5 1,004 10.0 1,338 10.7 1,343 10.2 1,260 10.6
SAARC Region (e) 1,133 9.5 917 9.1 1,259 10.1 1,259 9.6 1,217 10.2
Middle East (f) 1,092 9.1 918 9.1 1,185 9.5 1,159 8.8 1,201 10.1
APTA Region (g) 1,247 10.4 1,058 10.5 1,410 11.3 1,409 10.7 1,383 11.6
BIMSTEC (h) 1,046 8.8 812 8.1 1,127 9.0 1,139 8.7 1,092 9.2
C.I.S. Countries (i) 271 2.3 265 2.6 250 2.0 245 1.9 234 2.0

(a) The countries which are not mentioned have relatively smaller value of exports. Sources: National Gem and Jewellery Authority
(b) Provisional Sri Lanka Customs
(c) Members of the European Union are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Central Bank of Sri Lanka
Hungary, Republic of Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden
and UK. The UK was not included in European Union since 2021.
(d) Members of the Asian Clearing Union are Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka.
(e) South Asian Association for Regional Cooperation. Its members are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
(f) Middle Eastern countries are Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey, UAE and Yemen.
(g) Asia-Pacific Trade Agreement. Its members are Bangladesh, China, India, Laos, Mongolia, South Korea and Sri Lanka.
(h) Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. Its members are Bangladesh, Bhutan, India, Myanmar, Nepal, Thailand and
Sri Lanka.
(i) Members of the Commonwealth of Independent States are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan,
Ukraine and Uzbekistan.
EXTERNAL SECTOR TABLE 9
Direction of Trade - Imports (a)
Value in US$ million
2019 2020 2021 2022 2023 (b)
Countries
Value Share (%) Value Share (%) Value Share (%) Value Share (%) Value Share (%)
Largest Import Origins in 2023
India 3,899 19.6 3,079 19.2 4,625 22.4 4,738 25.9 3,136 18.7
China 4,034 20.2 3,579 22.3 4,756 23.0 3,285 18.0 3,030 18.0
United Arab Emirates 1,669 8.4 1,035 6.4 1,413 6.8 666 3.6 1,850 11.0
Singapore 964 4.8 692 4.3 792 3.8 871 4.8 866 5.2
Malaysia 853 4.3 611 3.8 803 3.9 969 5.3 828 4.9
United States 542 2.7 495 3.1 511 2.5 378 2.1 504 3.0
Russia 206 1.0 232 1.4 191 0.9 376 2.1 414 2.5
Indonesia 422 2.1 333 2.1 470 2.3 343 1.9 378 2.3
Oman 132 0.7 191 1.2 95 0.5 115 0.6 343 2.0
Pakistan 370 1.9 324 2.0 394 1.9 342 1.9 323 1.9

Other Import Origins

Australia 153 0.8 123 0.8 291 1.4 182 1.0 184 1.1
Austria 118 0.6 91 0.6 61 0.3 49 0.3 52 0.3
Bangladesh 41 0.2 48 0.3 83 0.4 82 0.4 67 0.4
Belgium 74 0.4 48 0.3 117 0.6 57 0.3 58 0.3
Brazil 33 0.2 28 0.2 37 0.2 34 0.2 46 0.3
Canada 224 1.1 208 1.3 119 0.6 102 0.6 124 0.7
Denmark 40 0.2 50 0.3 36 0.2 30 0.2 33 0.2
Egypt 16 0.1 17 0.1 18 0.1 13 0.1 39 0.2
France 220 1.1 116 0.7 137 0.7 110 0.6 195 1.2
Germany 388 1.9 316 2.0 347 1.7 286 1.6 257 1.5
Hong Kong 304 1.5 221 1.4 291 1.4 247 1.3 189 1.1
Iraq 29 0.1 9 0.1 37 0.2 25 0.1 84 0.5
Israel 85 0.4 67 0.4 100 0.5 121 0.7 100 0.6
Italy 307 1.5 266 1.7 315 1.5 289 1.6 244 1.5
Japan 875 4.4 528 3.3 419 2.0 252 1.4 188 1.1
Maldives 33 0.2 35 0.2 220 1.1 157 0.9 134 0.8
Netherlands 123 0.6 82 0.5 87 0.4 79 0.4 89 0.5
New Zealand 276 1.4 301 1.9 276 1.3 164 0.9 251 1.5
Philippines 36 0.2 43 0.3 65 0.3 30 0.2 23 0.1
Poland 20 0.1 18 0.1 27 0.1 25 0.1 24 0.1
Qatar 26 0.1 27 0.2 60 0.3 24 0.1 28 0.2
Romania 16 0.1 3 ... 48 0.2 53 0.3 151 0.9
Saudi Arabia 334 1.7 217 1.4 353 1.7 105 0.6 276 1.6
Slovenia 4 ... 4 ... 4 ... 6 ... 19 0.1
South Africa 191 1.0 224 1.4 484 2.3 433 2.4 246 1.5
South Korea 253 1.3 194 1.2 300 1.5 225 1.2 218 1.3
Spain 94 0.5 86 0.5 121 0.6 108 0.6 93 0.6
Sweden 51 0.3 52 0.3 49 0.2 46 0.3 36 0.2
Switzerland 109 0.5 129 0.8 99 0.5 105 0.6 98 0.6
Thailand 437 2.2 363 2.3 398 1.9 293 1.6 268 1.6
Turkey 106 0.5 91 0.6 131 0.6 164 0.9 148 0.9
Ukraine 74 0.4 76 0.5 91 0.4 48 0.3 48 0.3
United Kingdom 369 1.9 210 1.3 237 1.1 194 1.1 206 1.2
Uzbekistan 2 ... 2 ... ... ... ... ... 19 0.1
Vietnam 302 1.5 250 1.6 398 1.9 243 1.3 188 1.1
Other 1,081 5.4 939 5.8 729 3.5 1,825 10.0 716 4.3

European Union (EU)(c) 1,952 9.8 1,468 9.1 1,479 7.2 1,241 6.8 1,354 8.1
Asian Clearing Union (ACU) (d) 4,402 22.1 3,517 21.9 5,340 25.9 5,331 29.1 3,671 21.8
SAARC Region (e) 4,343 21.8 3,486 21.7 5,323 25.8 5,319 29.1 3,660 21.8
Middle East (f) 2,443 12.3 1,747 10.9 2,243 10.9 1,254 6.9 2,852 17.0
APTA Region (g) 8,230 41.3 6,900 43.0 9,766 47.3 8,331 45.5 6,455 38.4
BIMSTEC (h) 4,428 22.2 3,514 21.9 5,114 24.8 5,120 28.0 3,475 20.7
C.I.S.Countries (i) 319 1.6 345 2.2 324 1.6 430 2.4 495 2.9
(a) The countries which are not mentioned have relatively smaller value of imports. Sources: Ceylon Petroleum Corporation
(b) Provisional Lanka IOC PLC
Sri Lanka Customs
(c) Members of the European Union are Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Central Bank of Sri Lanka
Hungary, Republic of Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain,
Sweden and UK. The UK was not included in European Union since 2021.
(d) Members of the Asian Clearing Union are Bangladesh, Bhutan, India, Iran, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka.
(e) South Asian Association for Regional Cooperation. Its members are Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
(f) Middle Eastern countries are Bahrain, Iran, Iraq, Israel, Jordan, Kuwait, Oman, Palestine, Qatar, Saudi Arabia, Syria, Turkey, UAE and Yemen.
(g) Asia-Pacific Trade Agreement. Its members are Bangladesh, China, India, Laos, Mongolia, South Korea and Sri Lanka.
(h) Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation. Its members are Bangladesh, Bhutan, India, Myanmar, Nepal, Thailand
and Sri Lanka.
(i) Members of the Commonwealth of Independent States are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan,
Turkmenistan, Ukraine and Uzbekistan.
EXTERNAL SECTOR TABLE 10
Balance of Payments - Current Account
US$ million
2022 (a) 2023 (b)
Item
Credit Debit Net Credit Debit Net
Goods and services 16,169 19,244 -3,075 17,327 18,823 -1,496
Goods (c) 13,106 18,291 -5,185 11,911 16,811 -4,900
General merchandise 13,106 18,289 -5,183 11,911 16,807 -4,896
Non-monetary gold 2 -2 5 -5
Services 3,062 953 2,110 5,416 2,012 3,404
Manufacturing Services - - - 17 194 -177
Maintenance and repair services - - - 45 8 37
Transport 676 333 343 1,550 732 818
Sea Transport 410 137 272 813 286 528
Passenger - - - 0.1 3 -3
Freight 410 137 272 432 252 180
Other - - - 381 31 350
Air transport 266 195 71 736 440 296
Passenger 221 180 41 304 241 63
Freight 46 15 30 81 78 3
Other - - - 351 120 230
Postal services - - - 0.5 6 -6
Travel (d) 1,136 244 893 2,068 152 1,916
Construction 9 11 -2 355 111 244
Insuarance and pension services 19 36 -18 35 51 -16
Financial services 92 96 -5 64 57 7
Charges for the use of intellectual property - - - 15 94 -79
Telecommunication and computer services 1,097 161 936 917 251 666
Telecommunications services 31 28 3 122 53 69
Computer services 1,066 133 933 795 198 597
Other business services 15 16 -1 310 344 -33
Personal, cultural and recreational services - - - 35 11 24
Government goods and services n.i.e 18 56 -38 7 7 -1

Primary Income 266 2,136 -1,870 463 3,027 -2,564

Compensation of employees 30 69 -39 53 30 23
Investment Income 237 2,068 -1,831 410 2,997 -2,587
Direct Investment 15 549 -534 12 888 -876
Dividends 12 385 -374 6 621 -615
Re-invested earnings 3 164 -161 6 267 -261
Portfolio Investment 778 -778 866 -866
Equity 17 -17 86 -86
Interest 761 -761 780 -780
short-term 1 -1 20 -20
long-term 761 -761 760 -760
Actual ISB coupon payments 191 -
Accrued ISB coupon payments 551 727
Actual other sectors coupon payments 12 12
Accrued other sectors coupon payments 6 12
Other Investment 217 741 -523 349 1,243 -894
Government - Interest Payments 273 377
Government - Accrued Interest 133 384
Central Bank - Interest Payments 57 282
Central Bank - Accrued Interest 3 15
Commercial Bank - Interest Payments 217 129 349 74
Other Sectors - Interest Payments 130 111
Other Sectors - Accrued Interest 16 -
Reserve assets 5 5 49 49

Secondary Income 3,793 296 3,496 5,989 371 5,619

General Government (e) 3 3 20 20
Personal transfers 3,789 296 3,493 5,970 371 5,599
of which, worker’s remittances 3,789 5,970

Current Account 20,228 21,677 -1,448 23,780 22,221 1,559

Capital Account 38 19 19 94 31 63
Capital Transfers 38 19 19 94 31 63
General Government (f) 6 6 36 36
Private Capital transfers 32 19 13 57 31 27

Current and Capital Account 20,266 21,695 -1,429 23,873 22,251 1,622
(a) Revised Source: Central Bank of Sri Lanka
(b) Provisional
(c) Exports and imports are recorded on f.o.b. and c.i.f. valuation basis, respectively.
(d) Passenger services provided for non-residents are included in transport services.
(e) Includes outright grants received in the form of programme, food and commodity aid, cash and technical assistance.
(f) Includes outright grants received in the form of project aid.
EXTERNAL SECTOR TABLE 11

Balance of Payments - Financial Account

US$ million
2022 (a) 2023 (b)
Item Net Acquisition of Net Incurrence of Net Acquisition of Net Incurrence of
Financial Assets Liabilities Financial Assets Liabilities
Financial Account 84 1,652 3,474 2,171
Direct Investment 15 884 34 712
Equity and Investment Fund Shares 11 275 29 496
Equity other than Reinvestment of Earnings 7 111 22 228
Reinvestment of Earnings 3 164 7 267
Debt Instruments 5 610 5 216
Portfolio Investment - 370 173 931
Equity and Investment Fund Shares - 151 - 8
Debt Securities - 218 173 923
Deposit taking corporations - - 173 -
Long-term - - 173 -
General Government 212 910
Short Term (Treasury Bills) 30 132
Long Term 183 778
Treasury Bonds 21 78
Sri Lanka Development Bonds 2 -27
Sovereign Bonds 159 727
Maturities -391 -
Accrued Interest 551 727
Other Sectors 6 12
Long-term 6 12
Accrued Interest 6 12
Financial Derivatives - - - -
Other Investment 1,302 398 1,022 528
Currency and Deposits 514 -583 114 -143
Central Bank 402 -350
Short Term -1 0.1
Long Term 403 -341
International Swaps 400 -350
Accrued Interest on International Swaps 3 9
Deposit-taking Corporations 514 -985 114 207
Short Term 605 -985 -472 207
Long Term -91 - 586 -
Loans 385 1,056
Central Bank -140 -172
Credit and Loans with the IMF -140 -172
Extended Fund Facility -140 -172
Deposit-taking Corporations -1,163 -644
Short Term -826 -397
Long Term -337 -248
General Government 1,679 1,845
Long Term 1,679 1,845
Credit and loans with the IMF - 681
Disbursements 2,391 1,822
Accrued Interest 133 384
Repayments -845 -1,041
Other Sectors (c) 9 27
Long Term 9 27
Disbursements 332 331
Accrued Interest 16 -
Repayments -339 -304
Trade Credit and Advances 282 -895 186 -555
Deposit-taking Corporations -27 - -4 -
Short Term -27 - -4 -
Other Sectors (d) 310 -895 190 -555
Short Term 310 -895 190 -555
(a) Revised Source: Central Bank of Sri Lanka
(b) Provisional
(c) Includes State Owned Business Enterprises (SOBEs) and private sector companies.
(d) Includes trade credits received by the Ceylon Petroleum Corporation (CPC) and other private companies
EXTERNAL SECTOR TABLE 11 (Contd.)
Balance of Payments - Financial Account US$ million

2022 (a) 2023 (b)

Item Net Acquisition of Net Incurrence Net Acquisition of Net Incurrence
Financial Assets of Liabilities Financial Assets of Liabilities
Other Investment
Other Accounts Receivable/Payable 506 1,492 721 171
Central Bank - 1,492 - 171
Short Term (e) - 1,492 - 171
Deposit-taking Corporations 506 721
Short Term 506 721
Special Drawing Rights

Reserve Assets -1,234 2,245

Monetary Gold -152 -
Special Drawing Rights -118 33
Reserve Position in the IMF -58 -
Other Reserve Assets -906 2,212
Currency and Deposits -895 1,802
Claims on Monetary Authorities -526 -383
Claims on Other Entities -369 2,185
Securities -11 422
Debt Securities -11 422
Long Term -11 422
Other Claims -0.3 -11
Financial Account (net) -1,569 1,304
Errors and omissions -139 -318

Memorandum Items
Foreign Direct Investment (FDI)
Equity 111 228
BOI companies 72 146
CSE companies (not registered with BOI) 31 10
Other Companies 8 72
Reinvestment of Earnings 164 267
BOI companies 153 179
CSE companies (not registered with BOI) -39 38
Other Companies 50 50
Intercompany Loans 610 216
BOI Shareholder Advances 204 285
BOI Intercompany Loans 365 79
Other Companies 41 -148
Debt Repayments -0.1 -
Total FDI (1) 884 712
Loans to BOI Companies (2) 282 46
Total FDI, Including Loans to BOI Companies (1 + 2) (f) 1,167 758

Total Net Inflows to the CSE 182 18

Direct Investment 31 10
Portfolio Investment 151 8

Net Foreign Investments in Rupee Denominated Government Securities

51 210
(Treasury Bills and Bonds)
Foreign Purchases 69 824
Foreign Sales 18 614
(e) Net transactions of Asian Clearing Union (ACU) liabilities Source: Central Bank of Sri Lanka
(f) Any difference with the BOI estimates is due to differences in coverage and compilation methodologies.
EXTERNAL SECTOR TABLE 12

International Investment Position

US$ million
(End period position)
2022 (a) 2023 (b)
Item
Assets Liabilities Assets Liabilities
Direct Investment (c) 1,534 14,047 1,560 14,831
Equity and Investment Fund Shares 1,489 8,103 1,511 8,671
Debt Instruments 45 5,944 50 6,160
Portfolio Investment 0.1 4,366 174 7,744
Equity and Investment Fund Shares 332 484
Other Sectors 332 484
Debt Securities (d) 0.1 4,035 174 7,260
Deposit-taking Corporations 0.1 174
Long Term 0.1 174
General Government 3,957 7,128
Short Term 31 210
Long Term 3,926 6,918
Other Sectors 78 132
Long Term 78 132
Financial Derivatives - - - -

Other Investment 5,399 39,689 6,420 41,412

Currency and Deposits 1,656 5,880 1,770 7,941

Central Bank 2,037 3,891
Short Term 0.2 0.3
Long Term 2,037 3,891
Deposit-taking Corporations 1,656 3,843 1,770 4,050
Short Term 1,483 3,843 1,011 4,050
Long Term 173 759

Loans 29,497 31,721

Central Bank 1,062 904
Credit and Loans with the IMF 1,062 904
Deposit-taking Corporations 1,527 883
Short Term 704 307
Long Term 823 576
General Government 23,562 25,988
Long Term 23,562 25,988
Other Sectors (e) 3,346 3,946
Long Term 3,346 3,946

Trade Credit and Advances 1,493 1,020 1,679 464

Deposit-taking Corporations 70 67
Short Term 70 67
Other Sectors (f) 1,423 1,020 1,613 464
Short Term 1,423 1,020 1,613 464

Other Accounts Receivable/Payable 2,250 2,028 2,971 -

Central Bank (g) 2,028 -
Short Term 2,028 -
Deposit-taking Corporations 2,250 2,971
Short Term 2,250 2,971

Special Drawing Rights (SDRs) 1,265 1,285

Reserve Assets 1,898 4,392

Monetary Gold 28 31
Special Drawing Rights 2 34
Reserve Position in the IMF 4 4
Other Reserve Assets 1,864 4,323
Currency and Deposits 1,834 3,634
Claims on Monetary Authorities 373 597
Claims on Other Entities 1,462 3,037
Securities 30 690
Debt Securities 30 690

Total Assets / Liabilities 8,830 58,102 12,546 63,986

Net International Investment Position -49,272 -51,440
Memorandum Items
IIP- Maturity-wise Breakdown 8,830 58,102 12,546 63,986
Short Term 7,091 7,957 9,330 5,516
Long Term 1,739 50,145 3,216 58,471
(a) Revised Source: Central Bank of Sri Lanka
(b) Provisional
(c ) Include direct investment stock position of BOI, CSE and other private companies
(d) Foreign currency and local currency debt issuances are based on market values and book values respectively, while Sri Lanka
Development Bonds are based on face values.
(e) Include outstanding position of loans obtained by State Owned Business Enterprisess and private sector companies.
(f) Include outstanding trade credit position of Ceylon Petroleum Corporation and other private sector companies.
(g) Outstanding position of ACU liabilities managed by the Central Bank
EXTERNAL SECTOR TABLE 13

Outstanding External Debt US$ million

(End period position)

Item 2022 (a) 2023 (b)

General Government 27,518 33,117
Short Term 31 210
Debt Securities 31 210
Treasury Bills (c) 31 210
Long Term 27,488 32,907
Debt Securities 3,926 6,918
Treasury Bonds (c) 34 124
Sri Lanka Development Bonds (d) 27 -
International Sovereign Bonds (e) 3,866 6,794
Market Price of ISBs 3,315 5,517
Accrued Interest of ISB Coupons 551 1,278
Loans 23,562 25,988
Credit and loans with the IMF - 687
Outstanding Foreign Loans 23,413 24,784
Accrued Interest of Government Foreign Loans 149 517

Central Bank 6,391 6,081

Short Term 2,028 0.3
Currency and Deposits 0.2 0.3
Other Accounts Payable 2,028 -
Asian Clearing Union Liabilities 2,028 -
Long Term 4,364 6,080
Special Drawing Rights (SDRs) Allocation 1,265 1,285
Currency and Deposits 2,037 3,891
RBI Swap Arrangement 400 -
Bangladesh Bank Swap Arrangement 200 -
PBOC Swap Arrangement 1,434 1,420
RBI & ACU combined swap (Special Swap) Arrangement 2,451
Accrued Interest Applicable to Swap Arrangements 3 20
Loans 1,062 904
Credit and Loans with the IMF 1,062 904
Extended Fund Facility & Emergency Assistance 1,062 904

Deposit-taking Corporations 5,370 4,933

Short Term 4,547 4,357
Currency and Deposits (f) 3,843 4,050
Commercial Banks 3,843 4,050
Loans 704 307
Commercial Banks 704 307
Long Term 823 576
Loans 823 576
Commercial Banks 823 576

Other Sectors (g) 4,443 4,542

Short Term 1,020 464
Trade Credit and Advances (h) 1,020 464
Long Term 3,423 4,077
Debt Securities (e) 78 132
Market Price of International Bonds 72 113
Accrued Interest of International Bonds 6 18
Loans 3,346 3,946
Private Sector Corporations 2,361 2,966
State Owned Business Enterprises and Public Corporations 985 980

Direct Investment: Intercompany Lending (i) 5,944 6,160

Gross External Debt Position 49,667 54,832

Memorandum Items
Non-Resident Holdings of Debt Securities - 11,622 12,615
Sectorwise Breakdown at Face Value
General Government 11,447 12,440
Treasury Bills 34 233
Treasury Bonds 36 130
Sri Lanka Development Bonds 27 -
International Sovereign Bonds 10,800 10,800
Accrued Interest of ISB Coupons due to Non-Residents 551 1,278
Other Sectors 175 175
Face Value of Total Outstanding ISBs 12,550 12,550
Outstanding ISBs Held by Non-Residents 10,800 10,800
Outstanding ISBs Held by Residents 1,750 1,750
(a) Revised Source: Central Bank of Sri Lanka
(b) Provisional
(c) Based on book value
(d) Based on face value
(e) Based on market price
(f) Include deposits in Personal Foreign Currency accounts.
(g) Include private sector and State Owned Business Enterprises
(h) Include trade credits outstanding of the Ceylon Petroleum Corporation and private sector companies
(i) Include inter-company borrowings and shareholder advances of direct investment enterprises.
EXTERNAL SECTOR TABLE 14
Exchange Rate Movements (Rupees per Unit of Foreign Currency)
End Period Rates

Period US Dollar Pound Euro Japanese Indian SDR (a)

Sterling Yen Rupee

2019 181.6340 238.4582 203.6662 1.6717 2.5467 251.1689

2020 186.4082 254.3540 229.4219 1.8081 2.5467 268.4781

2021 200.4338 270.5957 226.8610 1.7415 2.6935 280.5251

2022 363.1100 437.3478 386.9300 2.7385 4.3861 483.2413

2023 323.9233 412.6135 358.7451 2.2911 3.8964 434.5982

2022 January 201.1910 269.8374 224.4990 1.7412 2.6805 280.0136

February 201.0571 268.6223 224.5004 1.7405 2.6781 280.4465

March 299.0000 392.5272 334.0279 2.4497 3.9432 413.3376

April 341.8500 426.4579 359.4553 2.6140 4.4617 459.5490

May 360.7600 455.2791 387.7448 2.8179 4.6458 486.9178

June 359.8782 436.8741 376.2707 2.6350 4.5623 477.8391

July 360.8000 439.0936 367.7995 2.6854 4.5305 477.5549

August 361.1480 421.3153 361.9786 2.6067 4.5413 469.9763

September 362.9000 402.2747 355.7872 2.5077 4.4529 464.4685

October 363.3000 421.0284 361.4108 2.4523 4.4160 466.2193

November 363.1875 434.8444 375.6085 2.6184 4.4494 477.5335

December 363.1100 437.3478 386.9300 2.7385 4.3861 483.2413

2023 January 362.1400 447.5869 393.0305 2.7837 4.4393 488.3349

February 361.6318 435.9833 383.0766 2.6549 4.3741 480.5327

March 327.2857 405.9652 357.1014 2.4620 3.9876 440.2745

April 321.6500 401.8052 354.5226 2.3983 3.9359 433.2658

May 295.5211 366.1950 316.4292 2.1134 3.5719 392.2924

June 308.8300 393.0325 337.9836 2.1449 3.7650 412.3097

July 329.3566 423.1903 362.6546 2.3272 4.0042 442.3062

August 322.6634 410.5569 352.5420 2.2119 3.9039 429.1230

September 324.4478 394.0094 342.6493 2.1774 3.8966 425.4289

October 327.3817 397.7688 347.1228 2.1896 3.9324 430.2254

November 329.0423 417.8179 361.0910 2.2370 3.9479 438.7088

December 323.9233 412.6135 358.7451 2.2911 3.8964 434.5982

(a) Special Drawing Rights (SDRs), the unit of account of the International Monetary Fund. Source : Central Bank of Sri Lanka
FISCAL SECTOR TABLE 15

Economic Classification of Government Fiscal Operations

Rs. million

Item 2014 2015 2016 2017 2018 2019 (a) 2020 2021 2022 2023 (b)

1. Total Revenue and Grants 1,204,621 1,460,892 1,693,558 1,839,562 1,932,459 1,898,808 1,373,308 1,463,810 2,012,589 3,074,324
1.1 Total Revenue 1,195,206 1,454,878 1,686,062 1,831,531 1,919,973 1,890,899 1,367,960 1,457,071 1,979,184 3,048,822
Tax Revenue 1,050,362 1,355,779 1,463,689 1,670,178 1,712,318 1,734,925 1,216,542 1,298,019 1,751,132 2,720,563
Taxes on Foreign Trade 198,483 244,231 302,538 311,782 288,341 280,965 312,334 277,275 273,926 335,266
Taxes on Domestic Goods and Services 539,023 724,282 747,147 921,244 959,365 843,355 555,718 629,812 857,459 1,399,126
Taxes on Net Income and Profits 198,115 262,583 258,857 274,562 310,449 427,700 268,249 302,115 534,021 911,355
Stamp Duty/Cess Levy/SRL/NBT/NSL/TL 114,742 124,683 155,147 162,591 154,162 182,904 80,241 88,817 85,726 74,816
Non Tax Revenue 144,844 99,099 222,374 161,353 207,656 155,974 151,417 159,052 228,052 328,259
Current Revenue 127,239 99,001 221,966 161,353 207,656 155,974 151,417 159,052 228,052 328,259
Capital Revenue (c) 17,604 98 407 - - - - - - -
1.2 Grants 9,415 6,014 7,496 8,031 12,486 7,909 5,348 6,740 33,405 25,502

2. Expenditure and Net Lending 1,795,865 2,290,394 2,333,883 2,573,056 2,693,228 3,337,896 3,040,996 3,521,735 4,472,556 5,356,591
2.1 Recurrent 1,322,898 1,701,658 1,757,782 1,927,693 2,089,713 2,424,582 2,548,359 2,747,512 3,519,633 4,699,679
Expenditure on Goods and Services 568,829 772,563 746,250 756,591 806,002 848,278 974,351 1,014,612 1,139,066 1,239,195
Interest Payments 436,395 509,674 610,895 735,566 852,190 901,353 980,302 1,048,382 1,565,190 2,455,600
Transfer Payments 317,674 419,420 400,637 435,536 431,521 551,524 717,133 684,518 815,376 1,004,884
Adjustment for Arrears as per the Ministry of Finance - - - - - 123,428 -123,428 - - -
2.2 Capital and Net Lending 472,967 588,736 576,101 645,364 603,515 913,314 492,638 774,223 952,923 656,912
Capital Expenditure 459,855 588,175 577,036 638,343 612,561 619,069 795,368 767,606 715,429 913,601
Lending Minus Repayments 13,112 561 -934 7,021 -9,046 -4,933 -3,552 6,617 237,495 -256,689
Adjustment for Arrears on capital expenditure as per the - - - - - 299,178 -299,178 - - -
Ministry of Finance
3. Current Account Balance -127,692 -246,779 -71,719 -96,162 -169,740 -533,683 -1,180,399 -1,290,441 -1,540,448 -1,650,857
4. Primary Balance -154,849 -319,828 -29,430 2,071 91,421 -537,736 -687,386 -1,009,542 -894,777 173,332
5. Overall Fiscal Balance -591,244 -829,502 -640,325 -733,494 -760,769 -1,439,088 -1,667,688 -2,057,925 -2,459,967 -2,282,267

6. Financing of Budget Deficit 591,244 829,502 640,325 733,494 760,769 1,439,088 1,667,688 2,057,925 2,459,967 2,282,267
6.1 Foreign Financing (Net) 212,523 236,803 391,914 439,243 323,535 542,641 -83,199 -13,901 424,822 494,655
6.2 Domestic Financing (Net) 378,721 592,699 248,411 294,251 437,234 896,448 1,750,887 2,071,826 2,035,145 1,787,612

(a) According to the Ministry of Finance, the fiscal sector statistics of 2019 have been restated as announced in the Budget Speech for 2020. Sources: Ministry of Finance, Economic Stabilisation and National
(b) Provisional Policies
(c) Sale of capital goods Central Bank of Sri Lanka

Note : Social Responsibility Levy (SRL), Nation Building Tax (NBT), National Security Levy (NSL)) and Telecommunications Levy (TL)
FISCAL SECTOR TABLE 16

Outstanding Central Government Debt (as at end year) (a)

Rs. million
Source 2019 2020 2021 2022 (b) 2023(b)(c)
Total Domestic Debt (d) 6,830,260 9,065,068 11,097,223 15,033,876 17,051,854
Short Term 1,270,374 2,197,594 3,139,794 4,267,724 3,616,227
Treasury Bills (e) 873,943 1,620,705 2,270,508 4,113,907 4,017,035
Provisional Advances from the Central Bank 236,609 153,079 150,129 235,639 0
Other Liabilities to the Banking Sector Net of Bank Deposits (f) 159,822 423,810 719,157 -81,822 -400,808

Medium and Long Term 5,559,887 6,867,473 7,957,430 9,882,058 12,646,945

Rupee Loans 24,088 24,088 24,088 24,088 0
Treasury Bonds 4,606,232 5,713,300 6,966,218 8,709,057 12,002,337
Sri Lanka Development Bonds (g) 559,284 486,870 455,203 382,092 0
International Sovereign Bonds (g)(h) 202,099 415,756 372,612 635,443 566,866
Offshore Banking Units 168,011 227,418 139,301 131,372 77,742
Other 173 41 7 7 0
Other Domestic (i) n.a. n.a. n.a. 884,093 788,682

By Debt Instrument 6,830,260 9,065,068 11,097,223 15,033,876 17,051,854

Rupee Loans 24,088 24,088 24,088 24,088 0
Treasury Bills (e) 873,943 1,620,705 2,270,508 4,113,907 4,017,035
Treasury Bonds 4,606,232 5,713,300 6,966,218 8,709,057 12,002,337
Sri Lanka Development Bonds (g) 559,284 486,870 455,203 382,092 0
International Sovereign Bonds (g)(h) 202,099 415,756 372,612 635,443 566,866
Provisional Advances from the Central Bank 236,609 153,079 150,129 235,639 0
Other (e)(i) 328,006 651,269 858,466 933,651 465,616

By Institution (j)(k) 6,830,260 9,065,068 11,097,223 15,033,876 17,051,854

Banks (Excluding Licensed Specialised Banks) 2,737,223 4,542,155 5,247,919 8,525,718 9,102,839
Central Bank
By Debt Instrument 310,909 876,818 1,565,494 2,833,607 2,743,621
Treasury Bills 25,873 654,611 1,391,281 2,575,717 220,797
Treasury Bonds (l) 48,872 70,575 25,471 22,461 2,522,824
Other 236,165 151,632 148,742 235,429 0
Commercial Banks
By Debt Instrument 2,426,313 3,665,337 3,682,425 5,692,111 6,359,218
Rupee Loans 15,870 15,870 15,870 15,870 0
Treasury Bills (k) 628,846 769,946 568,597 657,308 1,997,773
Treasury Bonds (k) 727,227 1,366,883 1,459,183 3,116,024 3,338,017
Sri Lanka Development Bonds (g) 523,831 444,173 406,317 333,611 0
International Sovereign Bonds (g) 202,099 415,756 372,612 635,443 566,866
Other (i) 328,442 652,710 859,845 933,853 456,561

Non Bank Sector

By Debt Instrument 3,825,703 4,210,099 4,822,098 6,164,063 7,506,289
Rupee Loans (m) 8,218 8,218 8,218 8,218 0
Treasury Bills 137,043 145,416 220,481 837,279 1,735,925
Treasury Bonds 3,644,981 4,013,761 4,544,506 5,270,079 5,761,309
Sri Lanka Development Bonds (g) 35,453 42,697 48,886 48,480 0
Other 7 7 7 7 9,055
By Institution (k) 3,825,703 4,210,099 4,822,098 6,164,063 7,506,289
Licensed Specialised Banks 537,175 707,538 807,352 821,593 1,008,618
Licensed Finance Companies 24,807 12,821 20,401 58,297 101,661
Corporates (n) 90,438 60,592 86,324 393,536 742,773
Insurance Companies 198,018 215,737 267,738 373,766 494,335
Superannuation Funds (o) 2,751,295 2,998,034 3,378,200 3,953,808 4,505,426
Government Institutes, Funds and State Owned Enterprises (p) 155,808 132,340 170,757 240,282 288,561
Local Individual 28,086 27,046 37,567 255,521 327,355
Other (q) 40,076 55,992 53,759 67,260 37,560
(Contd.)
FISCAL SECTOR TABLE 16 (Contd.)

Outstanding Central Government Debt (as at end year) (a)

Rs. million
Source 2019 2020 2021 2022 (b) 2023(b)(c)
Repurchase Transaction Allocations (k)(r) 267,334 312,814 1,027,207 344,096 (s) 442,727 (s)
Treasury bills 82,182 50,731 90,149 43,604 62,540
Treasury bonds 185,152 262,082 937,058 300,492 380,187
Total Foreign Debt (t)(u) 6,201,283 6,052,179 6,516,958 12,458,155 11,644,094
By Type 6,201,283 6,052,179 6,516,958 12,458,155 11,644,094
Project Loans 3,231,464 3,458,461 3,789,126 7,347,329 6,893,850
Non-project Loans 2,969,819 2,593,718 2,727,832 5,110,826 4,750,245
Commodity 52,312 43,023 34,904 183,082 208,724
Other 2,917,507 2,550,695 2,692,927 4,927,744 4,541,521
By Institution 6,201,283 6,052,179 6,516,958 12,458,155 11,644,094
Multilateral 1,469,867 1,601,482 1,895,340 3,611,552 3,816,950
Bilateral and Commercial 4,731,415 4,450,697 4,621,618 8,846,603 7,827,144
Of which;
International Sovereign Bonds (g) 2,531,493 2,203,279 2,243,049 3,921,587 3,498,371
Sri Lanka Development Bonds (g) 943 4,986 4,875 9,645 0
Foreign Currency Term Financing Facilities (g) 242,191 279,612 445,521 797,589 709,741
Non Resident Investment in Treasury Bills 23,727 670 204 12,476 75,419
Non Resident Investment in Treasury Bonds 80,294 6,204 1,710 13,078 42,023
Total Outstanding Central Government Debt (Net of Bank Deposits) 13,031,543 15,117,247 17,614,181 27,492,031 28,695,949
Total Outstanding Central Government Debt (Gross) 13,122,060 15,209,619 17,746,030 27,651,073 29,145,593
Memorandum Item: Public Guaranteed Debt (v)(w) 778,305 986,391 1,506,743 1,180,701 1,931,317
Sources : Ministry of Finance, Economic
(a) As per the guidelines of compiling government debt statistics in the Manual of Government Finance Statistics Stabilisation and National Policies
Central Bank of Sri Lanka
published by the IMF in 2014, non resident holdings of outstanding SLDBs have been classified under foreign debt and resident
holdings of outstanding ISBs of the Sri Lankan Government have been classified under domestic debt. Further, debt statistics are
presented on net basis (net of deposits)
(b) The outstanding central government debt excludes several debt service payments that became overdue after 12 April 2022, the
date of which the Interim Policy regarding the servicing of Sri Lanka’s external public debt was announced by the Ministry of Finance,
Economic Stabilisation and National Policies. These debt service payments comprise of overdue interest payments of affected debt
which deemed to be capitalised as per the Interim Policy. Further, December 2022 balances excluded certain coupon payments
pending settlement in relation Sri Lanka Development Bonds from April 2022 till end 2022.
(c) Provisional
(d) From 2023 onwards, domestic debt compilation method was change and is based on the data confirmed by the Ministry of Finance,
Economic Stabilisation and National Policies.
(e) Excludes Treasury bills held by non resident investors
(f) For data from 2019 to 2022 includes liabilities of the Central Government to commercial banks reported in the Monetary Survey of
the Central Bank. Thereafter such liabilities were taken from the data confirmed by the Ministry of Finance, Economic Stabilisation
and National Policies.
(g) Several interest payments that fell overdue after the debt standstill may not be included in the outstanding balance from 2022
onwards since recording of these debt service payments in the debt recording systems is not yet finalised. (Not applicable for SLDBs
for 2023)
(h) Represents ISB outstanding owned by the Licensed Commercial Banks
(i) Data from 2022 includes outstanding balance of the government guaranteed foreign currency debt of the Ceylon Petroleum
Corporation that was absorbed into central government debt.
(j) The composition of domestic debt held by the banking and non banking sectors was revised from 2016 due to the adjustment for
holdings of SLDBs of businesses and individuals.
(k) Institution wise classification was revised from the Annual Report 2022 based on records of the Central Depository System and the
data for 2018-2021 have been revised accordingly.
(l) The CBSL introduced outright purchase of Treasury bonds through Open Market Operations w.e.f. 06 September 2019
(m) Includes sinking fund
(n) Includes the holdings of Standalone Primary Dealers, leasing companies, private companies, mutual funds, etc.
(o) Includes the holdings of EPF, ETF, pension funds, provident funds, etc.
(p) Includes the holdings of government authorities, government departments, Ministries, etc.
(q) Includes the holdings of societies, clubs, associations, etc.
(r) Includes securities holdings under Repurchase agreements for which absolute ownership could not be established
(s) Holdings under repurchase transactions with respect to Open Market Operations, have been allocated to the respective
Licensed Commercial Bank or Standalone Primary Dealers.
(t) Foreign loan debt statistics and classification of foreign debt for 2021, 2022 and 2023 are prepared based on the data sourced
from the CS-DRMS maintained by the Ministry of Finance, Economic Stabilisation and National Policies, and extracted on 09 March
2023, 10 March 2023 and 26 February 2024.
(u) From December 2022 onwards, several outstanding project loan which were previously classified under Ceylon Electricity Board,
Airport and Aviation Services Ltd. and Sri Lanka Ports Authority were absorbed into central government debt.
(v) Outstanding amount of loans obtained by public corporations under Treasury guarantees
(w) Includes an international bond amounting to US dollars 175 million issued by the SriLankan Airlines in June 2014. This matured
in June 2019 and was reissued for a period of 05 years.
MONETARY AND FINANCIAL SECTOR TABLE 17

Commercial Banks’ Loans and Advances to the Private Sector (a)(b)

End December 2022 End December 2023

(c) (d)
%
Category
Change
Amount As a % Amount As a % of
(Rs. bn) of Total (Rs. bn) Total

1. Agriculture and Fishing 644 8.5 649 8.7 0.9

of which,
Tea 126 1.7 129 1.7 3.1
Rubber 60 0.8 51 0.7 -14.3
Coconut 29 0.4 29 0.4 -1.6
Paddy 34 0.5 41 0.5 19.2
Vegetable and Fruit Cultivation and Minor Food Crops 35 0.5 33 0.4 -6.7
Livestock and Dairy Farming 41 0.5 43 0.6 4.3
Fisheries 28 0.4 31 0.4 10.8
2. Industry 3,117 41.0 2,943 39.4 -5.6
of which,
Construction 1,487 19.6 1,423 19.0 -4.3
of which,
Personal Housing including Purchasing/Construction/Repairs 651 8.6 603 8.1 -7.4
Staff Housing 92 1.2 99 1.3 7.9
Food and Beverages 218 2.9 206 2.8 -5.7
Textiles and Apparel 316 4.2 278 3.7 -12.1
Wood and Wood Products including Furniture 19 0.3 28 0.4 48.2
Paper and Paper Products 20 0.3 27 0.4 34.1
Chemical, Petroleum, Pharmaceutical and Healthcare, and Rubber and Plastic Products 175 2.3 178 2.4 1.7
Non-metallic Mineral Products 17 0.2 35 0.5 103.4
Basic Metal Products 54 0.7 50 0.7 -7.6
Fabricated Metal Products, Machinery and Transport Equipment 143 1.9 157 2.1 9.9
Other Manufactured Products 90 1.2 80 1.1 -11.0
3. Services 2,028 26.7 2,071 27.7 2.1
of which,
Wholesale and Retail Trade 555 7.3 601 8.0 8.3
Tourism 385 5.1 347 4.6 -9.8
Financial and Business Services 354 4.7 335 4.5 -5.5
Transport 67 0.9 58 0.8 -13.1
Communication and Information Technology 72 0.9 130 1.7 81.2
Printing and Publishing 27 0.4 30 0.4 10.8
Education 38 0.5 32 0.4 -15.3
Health 140 1.8 117 1.6 -16.5
Shipping, Aviation and Freight Forwarding 31 0.4 40 0.5 28.9
4. Personal Loans and Advances (e) 1,813 23.9 1,809 24.2 -0.2
of which,
Consumer Durables 360 4.7 320 4.3 -11.3
Pawning 411 5.4 547 7.3 33.0
Credit Cards 150 2.0 156 2.1 4.0
Personal Education 20 0.3 25 0.3 23.7
Personal Healthcare 4 0.0 1 0.0 -69.4
5. Total (f) 7,602 100.0 7,473 100.0 -1.7
(a) Based on the Quarterly Survey of Commercial Banks’ Loans and Advances to the Private Sector, which includes loans and advances of Source: Central Bank of Sri Lanka
both DBUs and OBUs of Commercial Banks.
(b) Includes loans, overdrafts, and bills discounted and excludes cash items in the process of collection.
(c) Revised
(d) Provisional
(e) Excludes personal housing loans, which have been included under ‘Construction’ classified under ‘Industry’ and includes Safety
Net Scheme related loans.
(f) Total credit to the private sector as per the Quarterly Survey differ from that in the Monetary Survey due to differences in the
compilation methodologies.
MONETARY AND FINANCIAL SECTOR TABLE 18

Financial Soundness Indicators - Banking Industry

Category 2018 2019 2020 2021 2022 (a) 2023 (b)

1. Capital Adequacy (%)
1.1Capital Adequacy Ratio (CAR) 16.2 17.2 17.1 17.9 16.2 16.9
(Regulatory Capital to Risk Weighted Assets)
1.2 Core Capital Ratio (Tier 1) 13.1 13.7 13.6 14.4 13.2 13.8
(Core Capital to Risk Weighted Assets)
1.3 Core Capital to Total Assets 7.6 7.8 7.1 6.4 6.5 6.2
1.4 Stage 3 Loans Including Undrawn Amounts (net of Stage 3 Impairment) to Total Capital Funds 40.0 33.3 44.0 40.9
1.5 Borrowings to Capital Funds 171.1 148.6 134.9 148.9 117.1 78.6
1.6 Capital to Assets Ratio 8.7 9.0 8.6 8.7 8.2 8.7
1.7 Leverage Ratio 6.8 6.3 6.1 5.9 5.9

2. Assets Quality (%)

2.1 Stage 3 Loans to Total Loans Ratio (Including Undrawn Amounts and Net of Stage 3 Impairment) 5.2 7.6 11.3 12.8
2.2 Stage 3 Loans to Total Loans Ratio (Excluding Undrawn Amounts) 11.6 12.7
2.3 Total Impairment on Loans Made against Loans and Advances (excluding undrawn amounts) 4.7 5.3 8.1 8.7
2.4 Stage 3 Impairment Coverage (Including Undrawn Amounts) 41.2 46.3 45.2 49.0
2.5 Total Impairment Coverage (Including Undrawn Amounts) 4.6 5.0 7.9 8.6
2.6 Total Impairment on Loans Made against Total Assets 3.0 3.4 4.7 4.7
2.7 Total Loans and Advances to Total Assets 65.2 64.9 64.1 63.8 58.3 54.0
2.8 Total Investments to Total Assets 22.7 23.9 29.2 29.5 30.5 35.8
2.9 Total Income to Total Assets 10.7 10.7 8.8 8.0 12.2 13.8
2.10 Net Interest Income to Total Assets 3.4 3.4 3.0 3.3 3.9 3.5
2.11 Non Interest Income to Total Assets 1.3 1.1 0.8 0.9 1.4 1.0

3. Earnings and Profitability (%)

3.1 Return on Equity (ROE) - After Tax 13.2 10.3 9.4 13.4 10.4 10.6
3.2 Return on Assets (ROA) - Before Tax 1.8 1.4 1.1 1.4 0.9 1.5
3.3 Return on Assets (ROA) - After Tax 1.1 0.9 0.8 1.1 0.8 0.9
3.4 Interest Income to Total Income 88.2 90.2 90.8 88.6 88.1 92.7
3.5 Net Interest Income to Total Income 31.6 32.0 33.8 40.8 31.8 25.3
3.6 Non Interest Income to Total Income 11.8 9.8 9.2 11.4 11.9 7.3
3.7 Non Interest Expenses (Operating Expenses) to Total Income 20.2 19.7 18.8 19.8 13.7 13.3
3.8 Personal Expenses to Non Interest Expenses 47.8 47.8 53.6 55.1 53.5 50.9
3.9 Personal Expenses to Total Income 9.7 9.4 10.0 10.9 7.3 6.7
3.10 Impairment to Total Income 9.8 11.7 19.9 5.8
3.11 Efficiency Ratio 50.0 52.7 43.8 38.0 31.4 40.5
3.12 Interest Margin (Net interest income to Average Assets) 3.6 3.6 3.2 3.5 4.0 3.6

4. Liquidity (%)
4.1 Total Liquid Assets to Total Assets 25.7 28.9 34.2 29.7 27.4 39.5
4.2 Statutory Liquid Assets Ratio - Domestic Banking Unit (DBU) 27.6 31.0 37.8 33.8 29.9 44.9
4.3 Statutory Liquid Assets Ratio - Off-shore Banking Unit (OBU) 45.4 47.1 43.2 34.0 44.3 54.7
4.4 Rupee Liquidity Coverage Ratio 176.5 212.8 255.9 217.8 237.5 340.9
4.5 All Currency Liquidity Coverage Ratio 152.1 178.2 202.1 171.8 191.2 288.4
4.6 Liquid Assets to Deposits 35.7 39.5 44.0 38.8 34.8 48.5
4.7 Current & Savings Deposits to Total Deposits 32.0 31.4 34.5 38.0 31.2 32.3
4.8 Liquid Assets to Short Term Outflows 36.8 52.0
4.9 Deposit to Total Loans & Advances 110.4 112.8 121.3 120.1 135.2 150.9
4.10 Net Stable Funding Ratio 130.1 136.3 135.1 141.1 158.4

5. Assets / Funding Structure

5.1 Deposits (% of Total Assets) 72.0 73.2 77.7 76.5 78.8 81.5
5.2 Borrowings (% of Total Assets) 15.0 13.4 11.7 12.9 9.6 6.8
5.3 Capital Funds (% of Total Assets) 8.7 9.0 8.2 8.0 8.2 8.7
5.4 Other (% of Total Assets) 4.3 4.4 2.4 2.5 3.3 3.1

5.5 Credit to Deposits 90.6 88.7 82.4 83.3 73.9 66.3

5.6 Credit to Deposits and Borrowings 75.0 74.9 71.7 71.3 65.9 61.2
5.7 Credit to Deposits, Borrowings and Capital 68.2 67.8 65.7 65.4 60.3 55.7

6. Financial Infrastructure
6.1 No. of Branches (excluding Student Savings Units) 3,576 3,607 3,615 3,621 3,632 3,635
6.2 No. of ATMs 5,211 5,797 6,176 6,439 6,702 6,943
Note: Information from 2020 are based on Sri Lanka Financial Reporting Standards based Reporting Source: Central Bank of Sri Lanka
(a) Revised
(b) Provisional
MONETARY AND FINANCIAL SECTOR Table 19
Information on Licensed Finance Companies
2019 2020 2021 2022 2023
December December December December (a) December (b)
Financial Position (Rs. Billion)
Assets 1,390.7 1,367.9 1,452.0 1,610.2 1,692.0
Cash and Bank Balances 97.3 110.3 83.0 101.3 106.9
Investments (c) 131.7 158.6 167.1 199.6 312.7
Loans and Advances 1,066.6 1,010.2 1,112.6 1,198.4 1,160.4
Others Assets 95.2 88.8 89.3 110.9 112.0
Equity and Liabilities 1,390.7 1,367.9 1,452.0 1,610.2 1,692.0
Equity 187.9 232.6 289.7 363.4 408.1
Deposits 756.7 748.6 783.3 864.5 935.3
Borrowings 381.7 311.7 306.5 322.3 264.6
Other Liabilities 64.4 75.0 72.6 60.0 84.0
Financial Soundness Indicators (Per cent)
Capital Adequacy
Core Capital to Risk Weighted Assets (CCR) (d) 10.5 13.9 15.0 20.6 21.1
Capital Base to Risk Weighted Assets (RWCAR) (e) 11.9 15.1 16.6 22.0 22.3
Core Capital to Total Assets (Net) 10.6 13.7 14.8 18.4 18.4
Non-Performing Loans net of Stage 03 Impairment to Core Capital 26.9 25.0 14.4 54.6 49.2
Asset Quality
Gross Non Performing Advances to Total Advances 10.8 13.9 10.8 17.4 17.8
Net Non Performing Advances to Total Advances (f) 3.4 4.2 2.5 12.3 12.0
Impairment to Total Advances (g) 6.1 8.2 7.3 7.6 7.6
Stage 03 Impairment Coverage Ratio (h) 56.4 58.9 67.3 29.6 32.5
Liquidity
Regulatory Liquid Assets to Total Assets 8.7 9.3 9.6 10.7 14.1
Regulatory Liquid Assets to Deposits & Borrowings 11.3 13.0 13.9 15.6 21.2
Available Regulatory Liquid Assets to Required Regulatory Liquid Assets 147.0 277.0 171.8 188.7 246.6
Earnings (i)
Net Interest Margin (NIM) (j) 7.5 7.1 8.4 6.7 7.5
Return on Assets (k) 2.0 1.6 5.3 3.7 4.3
Return on Equity (l) 7.3 6.1 20.7 12.7 12.4
Interest Income to Interest Expenses 179.7 191.1 249.1 172.8 164.1
Cost to Income Ratio (m) 89.6 90.3 69.3 79.9 81.1
Non Interest Expenses (Operating Cost) to Gross Income (n) 75.2 75.6 51.6 58.1 58.7
Distribution of Branches
Number of Institutions 42 40 39 36 (o) 33 (o)
Number of Branches 1,374 1,459 1,647 1,849 1,828
Central Province 154 160 178 196 196
Eastern Province 112 114 137 156 146
North Central Province 95 103 107 123 118
North Western Province 150 159 174 188 183
Northern Province 84 91 114 140 150
Sabaragamuwa Province 108 111 117 128 125
Southern Province 143 154 169 195 189
Uva Province 62 65 77 91 91
Western Province 466 502 574 632 630
(a) Revised. Source: Central Bank of Sri Lanka
(b) Provisional.
(c) Includes Investments in Government of Sri Lanka Securities, Investments in Shares and Debentures, Investment properties and Other
Investments net Provision for decline in value of Investment Securities.
(d) Ratio of Core Capital (Tier 1 Capital after adjustments) to Risk Weighted Assets.
(e) Ratio of Capital Base (Tier 1 Capital after adjustments plus Eligible Tier 2 Capital after adjustments) to Risk Weighted Assets.
(f) Ratio of non performing loans net of stage 03 impairment to total advances was considered. Before 2022 ratio of non performing loans
net of interest in suspense and loan loss provisions to total advances was considered.
(g) Before 2022, Ratio of total provisions to total advances was considered.
(h) Before 2022, Ratio of total provisions to total non performing advances was considered.
(i) Income and expenses related items are for the 12 months ending December of respective years.
(j) Ratio of interest income less interest expenses to average assets.
(k) Profit before tax as a percentage of average assets.
(l) Profit after tax as a percentage of average equity capital.
(m) Ratio of total of interest expenses, operating expenses and total provisions to total of interest income and operating income.
(n) Ratio of non interest expenses (operating cost) to net interest income plus non interest income less loan loss provisions and loans written off.
(o) Excluding ETI Finance Ltd.
 SPECIAL STATISTICAL APPENDIX1

Table No.

1. REAL SECTOR

Population and Labour Force 1

National Output 2
Prices 3

2. EXTERNAL SECTOR

Balance of Payments 4
Reserves, Total Foreign Assets, External Debt and Exchange Rates 5

3. FISCAL SECTOR

Government Fiscal Operations 6

Central Government Debt 7

4. MONETARY SECTOR

Monetary Survey (M2b) 8

Interest Rates 9

1
The online version of the Special Statistical Appendix is available in Excel spreadsheet format and
contains additional data.

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Special Statistical Appendix Trends in Key Economic Variables
REAL SECTOR TABLE 1
Population and Labour Force
Year Mid Year Birth Death Life Expectancy Literacy Labour Force Unemployment
Population Rate Rate at Birth Rate Participation Rate (%) (b) (c) Rate (%) (b) (c)
(‘000) (per (per % (a)
Male Female Total Male Female Total Male Female
‘000) ‘000)
1970 12,514 29.4 7.5 - - - - - - - - -
1971 12,690 30.4 7.7 64.0 66.9 78.5 35.4 50.7 19.1 18.7 14.3 31.1
1972 12,861 30.0 8.1 - - - - - - - - -
1973 13,091 28.0 7.7 - - 80.8 34.4 48.5 20.2 18.3 13.7 26.8
1974 13,284 27.5 9.0 - - - - - - - - -
1975 13,496 27.8 8.5 - - - 36.6 50.2 22.1 19.7 14.3 33.1
1976 13,717 27.8 7.8 - - - - - - - - -
1977 13,942 27.9 7.4 - - - - - - - - -
1978 14,190 28.5 6.6 - - - 38.0 50.4 26.2 14.8 9.2 24.9
1979 14,472 28.9 6.5 - - 86.2 - - - - - -
1980 14,747 28.4 6.2 - - - - - - - - -
1981 14,847 28.2 5.9 67.7 72.1 87.2 33.8 49.4 17.1 17.9 13.0 32.9
1982 15,196 26.9 6.1 - - - 34.3 49.7 19.4 11.7 7.8 21.3
1983 15,417 26.3 6.2 - - - - - - - - -
1984 15,603 25.1 6.5 - - - - - - - - -
1985 15,842 24.6 6.2 - - - 38.9 52.7 25.4 13.2 9.8 20.3
1986 16,127 22.4 6.0 - - - - - - 15.5 11.3 23.6
1987 16,373 21.8 6.0 - - 88.6 - - - - - -
1988 16,599 20.7 5.8 - - - - - - - - -
1989 16,825 21.6 6.3 - - - - - - - - -
1990 17,015 20.8 6.0 - - - 51.9 (d) 67.7 (d) 36.2 (d) 15.9 (d) 11.1 (d) 23.4 (d)
1991 17,267 21.7 5.8 69.5 74.2 86.6 49.8 (d) 65.2 (d) 31.1 (d) 14.7 (d) 10.1 (d) 23.0 (d)
1992 17,426 21.5 5.9 - - - 48.2 (d) 64.3 (d) 31.1 (d) 14.6 (d) 10.7 (d) 22.8 (d)
1993 17,646 20.8 5.7 - - - 49.1 (d) 65.3 (d) 33.1 (d) 13.8 (d) 9.7 (d) 21.7 (d)
1994 17,891 20.8 5.9 - - 90.1 48.7 (d) 65.4 (d) 32.0 (d) 13.1 (d) 9.7 (d) 20.1 (d)
1995 18,136 19.9 6.0 - - - 47.9 (d) 64.4 (d) 31.7 (d) 12.3 (d) 9.0 (d) 18.7 (d)
1996 18,336 19.5 7.0 70.7 75.4 - 48.6 (d) 65.9 (d) 31.6 (d) 11.3 (d) 8.2 (d) 17.7 (d)
1997 18,568 18.8 6.4 - - 91.8 48.7 (d) 65.7 (d) 32.0 (d) 10.5 (d) 7.7 (d) 16.1 (d)
1998 18,784 18.2 6.2 - - - 51.7 (d) 67.3 (d) 36.4 (d) 9.2 (d) 6.5 (d) 14.6 (d)
1999 19,056 18.1 6.3 - - - 50.7 (d) 67.7 (d) 34.1 (d) 8.9 (d) 6.7 (d) 13.0 (d)
2000 19,102 18.2 6.1 - - - 50.3 (d) 67.2 (d) 33.9 (d) 7.6 (d) 5.8 (d) 11.0 (d)
2001 18,797 (e) 19.1 6.0 68.8 77.2 90.7 48.8 (d) 66.2 (d) 31.9 (d) 7.9 (d) 6.2 (d) 11.5 (d)
2002 18,921 (e) 19.4 5.9 - - - 50.3 (d) 67.9 (d) 33.6 (d) 8.8 (d) 6.6 (d) 12.9 (d)
2003 19,173 (e) 19.3 6.0 - - - 48.9 (f) 67.2 (f) 31.4 (f) 8.4 (f) 6.0 (f) 13.2 (f)
2004 19,435 (e) 18.8 5.9 - - 92.5 48.6 (g) 66.7 (g) 31.5 (g) 8.3 (g) 6.0 (g) 12.8 (g)
2005 19,644 (e) 18.9 6.7 75.6 67.9 90.7 48.3 (h)(i) 67.1 (h)(i) 30.9 (h)(i) 7.7 (h)(i) 5.5 (h)(i) 11.9 (h)(i)
2006 19,858 (e) 18.8 5.9 - - 91.5 51.2 (d) 68.1 (d) 35.7 (d) 6.5 (d) 4.7 (d) 9.7 (d)
2007 20,039 (e) 19.3 5.9 70.3 77.9 91.1 49.8 (d) 67.8 (d) 33.4 (d) 6.0 (d) 4.3 (d) 9.0 (d)
2008 20,246 (e) 18.5 6.1 - - 91.3 49.5 (f) 67.8 (f) 33.2 (f) 5.4 (f) 3.7 (f) 8.4 (f)
2009 20,476 (e) 18.0 6.2 - - 91.4 48.7 (f) 66.6 (f) 32.8 (f) 5.8 (f) 4.3 (f) 8.6 (f)
2010 20,675 (e) 17.6 6.3 - - 91.9 48.1 (f) 67.1 (f) 31.2 (f) 4.9 (f) 3.5 (f) 7.7 (f)
2011 20,892 (e) 17.3 5.9 - - 92.2 52.9 (i)(j) 74.0 (i)(j) 34.3 (i)(j) 4.2 (i)(j) 2.7 (i)(j) 7.1 (i) (j)
2012 20,425 (k) 17.6 6.0 72.0 78.6 92.7 52.5 (i)(j) 74.9 (i)(j) 32.9 (i)(j) 4.0 (i)(j) 2.8 (i)(j) 6.3 (i) (j)
2013 20,585 (k) 17.8 6.2 - - 92.4 53.7 (i)(j) 74.9 (i)(j) 35.4 (i)(j) 4.4 (i)(j) 3.2 (i)(j) 6.6 (i) (j)
2014 20,778 (k) 16.8 6.2 - - 93.2 53.2 (i)(j) 74.6 (i)(j) 34.6 (i)(j) 4.3 (i)(j) 3.1 (i)(j) 6.5 (i) (j)
2015 20,970 (k) 16.0 6.3 - - 93.2 53.8 (i)(j) 74.7 (i)(j) 35.9 (i)(j) 4.7 (i)(j) 3.0 (i)(j) 7.6 (i) (j)
2016 21,209 (k) 15.5 6.2 - - 93.1 53.8 (i) 75.1 (i) 35.9 (i) 4.4 (i) 2.9 (i) 7.0 (i)
2017 21,453 (k)(l) 15.2 6.5 - - 92.6 54.1 (i) 74.5 (i) 36.6 (i) 4.2 (i) 2.9 (i) 6.5 (i)
2018 21,670 (k)(m) 15.1 (m) 6.4 (m) - - 92.5 51.8 (i) 73.0 (i) 33.6 (i) 4.4 (i) 3.0 (i) 7.1 (i)
2019 21,803 (k)(m) 14.6 (m) 6.7 (m)(l) - - 92.9 52.3 (i) 73.0 (i) 34.5 (i) 4.8 (i) 3.3 (i) 7.4 (i)
2020 21,919 (k)(m) 13.8 (m) 6.0 (m) - - 93.0 50.6 (i) 71.9 (i) 32.0 (i) 5.5 (i) 4.0 (i) 8.5 (i)
2021 22,156 (k)(m) 12.9 (m) 7.4 (m) - - - 49.9 (i) 71.0 (i) 31.8 (i) 5.1 (i) 3.7 (i) 7.9 (i)
2022 22,181 (k)(m) 12.4 (m) 8.1 (m) - - - 49.8 (i) 70.5 (i) 32.1 (i) 4.7 (i) 3.7 (i) 6.5 (i)
2023 (m) 22,037 (k) 11.2 8.2 - - - 48.6 (i) 68.6 (i) 31.3 (i) 4.7 (i) 3.6 (i) 7.0 (i)
(a) From 2006, based on Quarterly Labour Force Survey (QLFS) of the the Department of Census and Statistics (DCS). Up to 2005, data available Sources: Registrar General’s Department
only in census years and some survey years. Department of Census and Statistics
(b) From 1990, based on QLFS of the DCS. Up to 1989, based on other surveys in which the definitions may differ.
(c) Data up to 2010 are for household population aged 10 years and above and from 2011 onwards are for those aged 15 years and above.
(d) Data excluding both Northern and Eastern Provinces.
(e) Based on Census of Population and Housing - 2001.
(f) Data excluding the Northern Province.
(g) Data excluding both Mullaitivu and Killinochchi districts.
(h) QLFS was conducted as a one-off survey in August 2005.
(i) Data covers the entire island.
(j) In July 2016, DCS published a re-weighted and revised labour force data series for 2011 onwards.
(k) Based on the Census of Population and Housing - 2012.
(l) Revised
(m) Provisional
Special Statistical Appendix Trends in Key Economic Variables
REAL SECTOR TABLE 2
National Output (a)
Share of GDP Share of GDP GDP Deflator
GDP at GDP at Per Capita Per Capita GDP (at Current Market Prices) (at Current Market Prices) (1996=100) (d)
Current Current GDP GDP at Growth
Market Market at Current Current Rate Taxes less
Year Prices Prices Market Market (%) Subsidies National Annual Annual
Agriculture Industry Services Consumption Investment
(Rs. mn) (USD mn) Prices (Rs.) Prices on Savings Index Change
(USD) products
(b) (c) (b)(c) (%) (%) (%) (%) (%) (%) (%) (d) (%)

1970 13,664 2,296 1,092 184 4.3 28.3 23.8 47.9 84.2 18.9 15.0 5.9
1971 14,050 2,365 1,107 186 0.2 27.1 24.7 48.2 84.9 17.1 14.7 6.2 3.7
1972 15,247 2,554 1,186 199 3.2 26.3 24.2 49.5 84.3 17.3 14.8 6.4 4.1
1973 18,404 2,876 1,406 220 3.7 27.3 25.4 47.3 87.5 13.7 11.5 7.5 17.6
1974 23,771 3,575 1,789 269 3.2 33.2 25.1 41.8 91.8 15.7 7.5 9.5 25.9
1975 26,577 3,791 1,969 281 2.8 30.4 26.4 43.2 91.9 15.6 7.4 10.2 7.5
1976 30,203 3,591 2,202 262 3.0 29.0 27.1 43.9 86.1 16.2 13.1 10.8 5.9
1977 36,407 4,105 2,611 294 4.2 30.7 28.7 40.6 81.9 14.4 17.7 12.8 18.8
1978 42,665 2,733 3,007 193 8.2 30.5 27.2 42.3 84.7 20.0 15.5 13.8 7.8
1979 52,387 3,365 3,620 232 6.3 26.9 28.2 44.8 86.2 25.8 14.8 16.0 15.8
1980 66,527 4,025 4,511 273 5.8 27.6 29.6 42.8 88.8 33.8 14.0 18.9 18.1
1981 85,005 4,416 5,725 297 5.8 27.7 28.0 44.3 88.3 27.8 14.3 22.8 20.6
1982 99,238 4,769 6,531 314 5.1 26.4 26.3 47.3 88.1 30.8 15.4 25.1 9.9
1983 121,601 5,168 7,887 335 5.0 28.3 26.3 45.4 86.2 28.9 16.4 28.7 14.6
1984 153,746 6,043 9,854 387 5.1 28.7 26.3 45.0 80.1 25.8 22.2 33.6 17.1
1985 162,375 5,978 10,250 377 5.0 27.7 26.2 46.1 88.1 23.8 14.2 33.9 0.9
1986 179,474 6,405 11,129 397 4.3 27.1 26.6 46.3 88.0 23.7 14.5 35.9 5.8
1987 196,723 6,680 12,015 408 1.5 27.0 27.4 45.6 87.2 23.3 15.3 38.4 7.0
1988 221,982 6,978 13,373 420 2.7 26.3 26.7 47.0 88.0 22.8 14.2 42.8 11.5
1989 251,891 6,987 14,971 415 2.3 25.6 26.8 47.6 87.8 21.7 14.6 46.9 9.6
1990 321,784 8,033 18,912 472 6.2 26.3 26.0 47.7 85.7 22.2 16.8 56.3 20.0
1991 372,345 9,000 21,564 521 4.6 26.8 25.6 47.7 87.2 22.9 15.2 62.5 11.0
1992 425,283 9,703 24,405 557 4.3 25.9 25.6 48.5 85.0 24.3 17.9 68.8 10.0
1993 499,565 10,354 28,310 587 6.9 24.6 25.6 49.8 84.0 25.6 20.2 75.3 9.5
1994 579,084 11,718 32,367 655 5.6 23.8 26.2 50.1 84.8 27.0 19.1 82.3 9.3
1995 667,772 13,030 36,820 718 5.5 23.0 26.5 50.5 84.7 25.7 19.5 89.2 8.4
1996 768,128 13,898 41,892 758 3.8 22.4 26.4 51.1 84.7 24.2 19.0 100.0 12.1
1997 890,272 15,092 47,947 813 6.3 21.9 26.9 51.2 82.7 24.4 21.5 108.6 8.6
1998 1,017,986 15,761 54,194 839 4.7 21.1 27.5 51.4 80.9 25.1 23.4 117.8 8.4
1999 1,105,963 15,711 58,038 824 4.3 20.7 27.3 52.0 80.5 27.3 23.5 123.1 4.4
2000 1,257,636 16,596 65,838 869 6.0 19.9 27.3 52.8 82.6 28.0 21.5 131.3 6.7
2001 1,407,398 15,750 74,874 838 -1.5 20.1 26.8 53.1 84.2 22.0 20.3 147.6 12.4
2002 1,636,037 17,102 86,467 904 4.0 14.3 28.0 57.7 84.0 22.5 21.0 160.0 8.4
2003 1,822,468 18,882 95,054 985 5.9 13.2 28.4 58.3 84.0 22.0 21.5 168.2 5.1
2004 2,090,841 20,663 107,581 1,063 5.4 12.5 28.6 58.8 83.6 25.3 22.0 183.0 8.8
2005 2,452,782 24,406 124,862 1,242 6.2 11.8 30.2 58.0 82.1 26.8 23.8 202.1 10.4
2006 2,938,680 28,267 147,985 1,423 7.7 11.3 30.6 58.0 83.0 28.0 22.3 224.9 11.3
2007 3,578,688 32,350 178,586 1,614 6.8 11.7 29.9 58.4 82.4 28.0 23.3 256.4 14.0
2008 4,410,682 40,714 217,855 2,011 6.0 13.4 29.4 57.2 86.1 27.6 17.8 298.3 16.3
2009 4,835,293 42,066 236,144 2,054 3.5 12.7 29.7 57.6 82.1 24.4 23.7 315.8 5.9
2010 6,413,668 56,726 310,214 2,744 8.0 8.5 26.6 54.6 10.2 76.9 30.4 28.5 338.9 7.3
2011 7,219,106 65,293 345,544 3,125 8.4 8.8 28.0 55.1 8.0 79.8 33.4 26.3 351.8 3.8
2012 8,732,463 68,434 427,538 3,351 9.1 7.4 30.1 55.6 6.8 72.8 39.1 33.3 389.9 10.8
2013 9,592,125 74,294 465,976 3,609 3.4 7.7 29.2 56.4 6.8 75.4 33.2 29.9 414.3 6.2
2014 10,361,151 79,359 498,660 3,819 5.0 8.0 28.3 56.9 6.8 75.8 32.3 29.8 426.3 2.9
2015 11,566,987 85,110 551,597 4,059 4.2 8.2 29.5 54.2 8.0 72.9 34.3 32.0 429.1 0.6
2016 12,812,975 87,992 604,129 4,149 5.1 7.3 30.5 53.4 8.8 70.4 36.5 34.5 452.5 5.4
2017 14,387,319 94,356 670,644 4,398 6.5 7.4 31.1 52.2 9.2 67.0 39.7 37.3 477.2 5.5
2018 15,351,933 94,749 708,442 4,372 2.3 7.6 30.1 53.6 8.7 68.9 38.1 35.1 497.7 4.3
2019 15,910,976 88,989 729,761 4,082 -0.2 7.3 29.2 55.7 7.8 71.7 34.1 32.0 517.0 3.9
2020 (e) 15,646,254 84,420 713,822 3,851 -4.6 8.3 28.2 57.8 5.7 73.3 32.9 31.3 533.0 3.1
2021 (e) 17,612,370 88,611 794,926 3,999 4.2 8.8 30.0 55.9 5.4 70.7 36.7 33.0 575.8 8.0
2022 (e)(f) 24,063,762 76,845 1,084,882 3,464 -7.3 8.5 29.8 57.0 4.7 75.0 28.6 27.2 849.1 47.5
2023 (f) 27,629,665 84,403 1,253,785 3,830 -2.3 8.3 25.6 59.9 6.2 76.2 25.3 27.2 997.8 17.5
(a) National Accounts data from 1959 to 2001 are based on the estimates of the Central Bank of Sri Lanka (CBSL) and 2002 onwards are based on the estimates of the Sources: Department of Census
Department of Census and Statistics (DCS). and Statistics
National Accounts estimates were rebased in 1970, 1982, and 1996 by CBSL and DCS in 2002, 2010 and 2015. Central Bank of Sri Lanka
GDP and GNI estimates published for the relevant year before the base year revisions are given below.
1970 (CBSL estimates) : GDP (current factor cost prices) = Rs. 11,705 mn, GNI (current factor cost prices) = Rs. 12,671 mn
1982 (CBSL estimates) : GDP (current factor cost prices) = Rs. 91,943 mn, GNI (current factor cost prices) = Rs. 89,609 mn
1996 (CBSL estimates) : GDP (current factor cost prices) = Rs. 695,934 mn, GNI (current factor cost prices) = Rs. 684,676 mn
2002 (CBSL estimates) : GDP (current market prices) = Rs. 1,581,885 mn, GNI (current market prices) = Rs. 1,599,867 mn
2010 (DCS estimates) : GDP (current market prices) = Rs. 5,604,104 mn, GNI (current market prices) = Rs. 5,534,327 mn
2015 (DCS estimates) : GDP (current market prices) = Rs. 10,950,621 mn, GNI (current market prices) = Rs. 10,675,880 mn
(b) Based on quarterly GDP in USD terms calculated using quarterly average exchange rate from 2015 onwards.
(c) Estimates updated with latest population figures.
(d) This series has been computed by splicing several series of implicit GDP deflators obtained with different base years. Hence, it would differ from a series compiled using
the current and constant values of GDP.
(e) Revised
(f) Provisional
Special Statistical Appendix Trends in Key Economic Variables
REAL SECTOR Table 3
Prices
Annual Average Price Index Annual Average Percentage Change

Year CCPI CCPI CCPI CCPI CCPI NCPI NCPI WPI PPI PPI CCPI CCPI CCPI CCPI CCPI NCPI NCPI WPI PPI PPI
(2006/ (2013 (2018 (2006/ (2013 (2018
(1952 (2002 (2013 (2021 (2013 (2021 (1974 (1952 (2002 (2013 (2021 (2013 (2021 (1974
07 Q4 Q4 07 Q4 Q4
= = = = = = = = = = = = = =
= = = = = =
100) 100) 100) 100) 100) 100) 100) 100) 100) 100) 100) 100) 100) 100)
100) 100) 100) 100) 100) 100)

(a) (b) (c) (d) (e) (f) (g) (h) (i) (a) (b) (c) (d) (e) (f) (g) (h) (i)
1970 138.2 5.9
1971 141.9 2.7
1972 150.9 6.3
1973 165.4 9.6
1974 185.8 12.3
1975 198.3 103.4 6.7
1976 200.7 111.9 1.2 8.2
1977 203.2 135.5 1.2 21.1
1978 227.8 156.7 12.1 15.6
1979 252.3 171.6 10.8 9.5
1980 318.2 229.5 26.1 33.7
1981 375.4 268.5 18.0 17.0
1982 416.1 283.3 10.8 5.5
1983 474.2 354.1 14.0 25.0
1984 553.1 444.7 16.6 25.6
1985 561.2 377.1 1.5 -15.2
1986 606.0 366.0 8.0 -2.9
1987 652.8 414.9 7.7 13.4
1988 744.1 488.7 14.0 17.8
1989 830.2 532.9 11.6 9.0
1990 1,008.6 651.1 21.5 22.2
1991 1,131.5 710.8 12.2 9.2
1992 1,260.4 773.0 11.4 8.8
1993 1,408.4 831.8 11.7 7.6
1994 1,527.4 873.4 8.4 5.0
1995 1,644.6 950.3 7.7 8.8
1996 1,906.7 1,145.1 15.9 20.5
1997 2,089.1 1,224.3 9.6 6.9
1998 2,284.9 1,298.7 9.4 6.1
1999 2,392.1 1,295.3 4.7 -0.3
2000 2,539.8 1,317.2 6.2 1.7
2001 2,899.4 1,471.2 14.2 11.7
2002 3,176.4 1,628.9 9.6 10.7
2003 3,377.0 105.8 1,679.1 6.3 3.1
2004 3,632.8 115.3 1,889.0 7.6 9.0 12.5
2005 4,055.5 128.0 2,105.9 11.6 11.0 11.5
2006 4,610.8 140.8 2,351.5 13.7 10.0 11.7
2007 5,416.1 163.1 2,924.4 17.5 15.8 24.4
2008 199.9 129.2 3,653.6 22.6 24.9
2009 206.8 133.6 3,500.9 3.4 3.5 -4.2
2010 219.1 141.9 3,893.0 5.9 6.2 11.2
2011 226.5 151.5 4,306.5 6.9 6.7 10.6
2012 162.9 4,457.3 7.6 3.5
2013 174.2 4,867.9 6.9 9.2
2014 179.9 105.1 105.5 5,022.1 101.6 3.3 3.2
2015 181.5 107.4 109.5 5,072.7 105.3 0.9 2.2 3.8 1.0 3.6
2016 188.3 111.7 113.8 5,284.0 107.1 3.7 4.0 4.0 4.2 1.7
2017 119.0 122.6 5,674.7 125.3 6.6 7.7 7.4 17.0
2018 124.1 125.2 5,867.0 133.2 4.3 2.1 3.4 6.3
2019 129.5 129.6 6,069.4 137.1 105.5 4.3 3.5 3.4 2.9
2020 135.4 137.6 6,399.3 144.9 111.6 4.6 6.2 5.4 5.7 5.8
2021 143.4 147.2 6,744.9 123.7 6.0 7.0 5.4 10.9
2022 209.9 163.5 221.5 174.9 11,000.3 215.2 46.4 50.4 63.1 74.0
2023 (j) 191.8 203.8 12,101.2 240.0 17.4 16.5 10.0 11.5
(a) Represents the consumption basket of low income households in the Colombo Municipality. Compilation of this index was discontinued since May 2008. Sources: Department of Census and Statistics
Central Bank of Sri Lanka
(b) Represents the consumption basket of urban households within the Colombo District. Compilation of this index was discontinued since June 2011.
(c) Represents the consumption basket of urban households within the Colombo District. Compilation of this index was discontinued since January 2017.
(d) Represents the consumption basket of urban households within the Colombo District. Compilation of this index was discontinued since February 2023.
(e) Represents the consumption basket of urban households within the Colombo District.
(f) Represents the consumption basket of households in the entire island. Compilation of this index was discontinued since January 2023.
(g) Represents the consumption basket of households in the entire island.
(h) Represents the production basket of producers in the entire island. Compilation of this index was discontinued since November 2021.
(i) Represents the production basket of producers in the entire island.
(j) Provisional
Special Statistical Appendix Trends in Key Economic Variables
EXTERNAL SECTOR TABLE 4
Balance of Payments Values in USD million
Current Account Financial Account (c)
Long-term Capital (Net) Short- Financial Overall Terms of
Exports Imports Services Transfers Current As a Capital term Account Balance Trade
Year & Primary (Net) Account % of Account Direct Other Government Balance (% change)
(Net)
Income (a) Balance GDP (Net) Investment Private (e) (f) (g)
(Net) (b) (d)

1970 338.7 391.8 -17.5 11.8 -58.8 -2.6 - -0.3 0.0 57.6 -0.7 - -7.0 -6.3
1971 325.4 373.7 -2.4 14.3 -36.4 -1.5 - 0.3 0.0 74.0 -3.9 - 32.9 -5.8
1972 317.9 360.6 -2.5 12.4 -32.8 -1.3 - 0.3 -0.2 48.6 -6.4 - 69.5 -5.6
1973 366.4 412.9 8.1 13.3 -25.1 -0.9 - 0.5 -0.3 68.9 -1.7 - 45.9 -11.8
1974 511.2 701.1 11.4 42.1 -136.4 -3.8 - 1.4 -0.2 84.6 -2.3 - -57.0 -11.4
1975 563.4 767.3 12.7 79.9 -111.4 -2.9 - -0.1 0.0 62.7 -4.3 - 10.4 -19.8
1976 558.8 643.1 13.3 65.1 -5.8 -0.2 - 0.0 -5.7 83.1 -7.1 - 118.3 30.5
1977 767.1 726.2 34.3 69.0 144.1 3.5 - -1.0 -3.3 51.1 -10.0 - 360.9 31.9
1978 845.1 1,025.4 7.6 79.6 -93.1 -3.4 - 1.5 0.5 157.2 7.3 - 120.1 -1.8
1979 981.4 1,449.4 47.5 192.2 -228.4 -6.8 - 47.0 9.1 156.2 0.1 - 51.9 -28.3
1980 1,064.7 2,051.2 52.0 274.6 -660.0 -16.4 - 42.9 40.3 157.5 157.5 - -191.9 -19.0
1981 1,065.5 1,876.9 4.3 364.8 -442.3 -10.0 - 50.2 52.9 266.0 31.4 - 19.9 -21.3
1982 1,013.7 1,994.1 -15.1 427.3 -568.1 -11.9 - 63.6 194.5 261.2 7.1 - -48.0 -5.7
1983 1,064.1 1,921.3 -60.0 444.3 -472.8 -9.1 - 37.5 94.9 281.0 37.6 - 18.0 21.6
1984 1,462.3 1,928.1 -68.2 479.4 -54.7 -0.9 - 32.6 -4.7 341.7 -25.5 - 269.3 22.4
1985 1,315.3 2,044.3 -134.3 443.8 -419.5 -7.0 - 24.4 31.2 273.0 4.4 - -49.3 -17.8
1986 1,209.7 1,973.2 -129.1 466.4 -426.1 -6.7 - 28.2 18.3 291.7 -13.5 - -70.3 -4.3
1987 1,395.7 2,075.1 -156.9 492.9 -343.4 -5.1 - 58.2 -13.0 198.0 39.0 - -67.3 2.4
1988 1,477.2 2,240.2 -153.2 526.9 -389.3 -5.6 - 43.0 -43.0 245.0 16.0 - -90.7 -10.3
1989 1,547.1 2,226.5 -157.7 518.7 -318.3 -4.6 - 17.9 -50.0 217.0 92.0 - -88.0 0.5
1990 1,983.9 2,686.4 -97.9 423.4 -377.0 -4.7 117.5 41.6 -44.6 405.3 -5.7 - 118.7 -12.5
1991 2,039.5 3,036.6 -91.2 468.9 -619.4 -6.9 134.6 62.7 -24.4 500.2 184.6 - 290.2 1.1
1992 2,460.8 3,505.4 -32.6 522.6 -554.6 -5.7 121.6 121.1 25.4 266.2 130.1 - 189.6 19.8
1993 2,863.7 4,011.3 39.4 612.7 -495.5 -4.8 108.6 187.2 187.9 264.8 359.7 - 660.9 4.3
1994 3,208.6 4,767.3 17.8 680.6 -860.3 -7.3 113.1 158.2 294.5 252.8 124.3 - 239.7 -0.7
1995 3,806.6 5,311.1 -18.0 736.0 -786.5 -6.0 117.3 53.1 90.7 358.3 79.2 - 51.5 -0.9
1996 4,095.1 5,438.8 -92.3 759.1 -676.9 -4.9 95.9 119.9 1.6 259.2 -17.6 - -67.8 2.3
1997 4,639.0 5,863.8 -0.4 832.3 -392.9 -2.6 87.1 429.8 47.4 238.6 -200.7 - 162.9 2.3
1998 4,797.8 5,889.5 -34.9 900.7 -225.9 -1.4 79.6 193.0 1.7 203.1 -64.0 - 36.8 13.5
1999 4,610.1 5,979.3 -106.6 912.8 -563.0 -3.6 80.3 176.9 196.0 62.1 -142.4 - -263.2 -5.0
2000 5,522.3 7,319.8 -267.0 997.8 -1,066.0 -6.4 50.2 176.0 82.1 47.0 88.1 393.2 -521.9 -6.1
2001 4,816.9 5,974.4 -62.6 1,005.2 -215.1 -1.4 197.5 172.0 -257.1 249.0 200.5 364.4 219.8 -1.7
2002 4,699.0 6,105.6 42.5 1,128.0 -236.5 -1.4 65.0 185.0 -21.0 162.0 53.3 379.3 338.0 4.6
2003 5,133.3 6,671.9 227.0 1,241.0 -71.0 -0.4 74.0 201.0 -33.0 554.0 -73.6 648.4 502.0 -7.4
2004 5,757.2 7,999.8 215.0 1,380.0 -648.0 -3.1 64.0 227.0 14.0 439.0 -112.6 567.4 -205.0 -5.2
2005 6,346.7 8,863.2 38.2 1,828.1 -650.2 -2.7 249.8 233.8 10.8 553.5 176.0 974.1 501.4 -4.2
2006 6,882.7 10,253.0 -132.3 2,004.1 -1,498.6 -5.3 290.6 451.1 -35.0 490.5 610.8 1,517.4 203.6 -3.5
2007 7,640.0 11,296.5 -55.5 2,310.6 -1,401.5 -4.3 268.8 548.3 30.6 671.9 577.2 1,828.0 530.5 -1.0
2008 8,110.6 14,091.2 -571.1 2,666.1 -3,885.6 -9.5 290.6 690.5 73.9 252.0 466.8 1,483.2 -1,384.8 3.0
2009 7,084.5 10,206.6 -96.7 3,004.5 -214.3 -0.5 232.9 384.0 79.3 840.3 1,057.7 2,361.3 2,725.3 -2.7
2010 8,625.8 13,450.9 89.8 3,660.3 -1,075.0 -1.9 163.9 435.1 148.7 1,795.5 334.0 2,713.3 921.0 27.4
2011 10,558.8 20,268.8 451.8 4,642.8 -4,615.4 -7.1 164.4 895.9 175.3 2,236.7 790.2 4,098.1 -1,059.4 -8.9
2012 (c)(f) 9,773.5 19,190.2 42.9 5,392.0 -3,981.7 -5.8 130.3 -877.2 -718.9 -992.4 -1,674.9 -4,263.4 151.1 -1.5
2013 10,394.3 18,002.8 -571.6 5,639.5 -2,540.6 -3.4 70.9 -867.5 -605.2 -841.4 -749.6 -3,063.7 985.2 4.6
2014 11,130.1 19,416.8 72.0 6,227.0 -1,987.7 -2.5 58.3 -826.8 -428.7 -645.7 365.1 -1,536.1 1,369.1 4.3
2015 10,546.5 18,934.6 312.0 6,193.3 -1,882.8 -2.2 46.3 -626.7 -8.6 -469.6 -1,207.4 -2,312.3 -1,488.7 2.7
2016 10,309.7 19,182.8 677.7 6,453.0 -1,742.4 -2.0 25.3 -660.2 -136.3 -1,287.1 -98.2 -2,181.8 -499.8 4.0
2017 11,360.4 20,979.8 983.8 6,326.6 -2,309.0 -2.4 10.9 -1,300.9 -210.9 -1,223.3 612.3 -2,122.8 2,068.5 1.2
2018 11,889.6 22,232.7 1,381.5 6,162.6 -2,799.1 -3.0 14.4 -1,546.2 -113.8 -557.0 -1,160.7 -3,377.7 -1,102.9 0.02
2019 11,940.0 19,937.1 387.7 5,766.0 -1,843.4 -2.1 23.1 -666.1 202.6 88.8 -2,085.2 -2,459.9 376.6 -1.6
2020 10,047.4 16,055.4 -1,385.9 6,206.8 -1,187.1 -1.4 28.1 -419.5 56.2 -169.4 138.3 -394.4 -2,327.7 2.5
2021 12,498.6 20,637.4 -372.9 5,227.5 -3,284.3 -3.7 25.1 -574.8 167.1 -873.0 -2,930.3 -4,210.9 -3,966.6 -8.6
2022 (h) 13,106.4 18,291.0 239.7 3,496.4 -1,448.5 -1.9 19.4 -869.0 9.0 1,679.1 -2,387.6 -1,568.5 -2,806.1 -11.6
2023 (i) 11,910.7 16,811.1 840.7 5,618.6 1,558.9 1.8 63.1 -677.9 26.7 1,845.3 109.4 1,303.6 2,825.6 -0.6

(a) Replaced with Secondary Income (net) based on the BPM6 format, from 2012 Source: Central Bank of Sri Lanka
(b) From 2015 onwards, data is based on the GDP estimates of DCS with base year 2015.
(c) Based on the BPM6 format, financial account (net) data is represented as Net Acquisition of Assets - Net Incurrence of Liabilities from 2012 onwards,
resulting in a ‘minus’ sign for net inflows to the financial account from 2012 onwards.
(d) Replaced with ‘Loans - other sector - long term ‘ under ‘Net Incurrence of Liabilities’ based on the BPM6 format, from 2012
(e) Replaced with ‘Loans - government - long term’ under ‘Net Incurrence of Liabilities’ based on the BPM6 format, from 2012
(f) Includes net increase/decrease in reserve assets and reserve related Liabilities based on the BPM6 format, and is the residual net flows to financial account from 2012 onwards.
(g) Trade indices have been calculated with a wider coverage using 2010 as the base year, from 2007.
(h) Revised
(i) Provisional
Special Statistical Appendix Trends in Key Economic Variables
EXTERNAL SECTOR TABLE 5
Reserves, Total Foreign Assets, External Debt and Exchange Rates
Gross Total Foreign Total External Debt Exchange Rates
Official Assets (a) Debt (b) Service (Sri Lanka Rupees per Unit of Foreign Currency)
Reserves (USD Months (USD as a % of Ratio(d) Year End Annual Average
Year
(USD million) of million) GDP US dollar US dollar Pound Euro Japanese Indian Deutsche French SDR
million) Imports (c) sterling yen rupee mark frank (e)

1970 42.3 67.6 2.1 419.2 18.3 20.1 5.96 5.95 14.28 - 0.02 0.79 1.63 1.07 5.95
1971 52.4 83.6 2.7 465.9 19.7 21.9 5.96 5.94 14.45 - 0.02 0.79 1.70 1.07 5.95
1972 60.6 108.5 3.6 485.1 19.0 21.8 6.70 5.97 14.94 - 0.02 0.79 1.87 1.18 6.48
1973 82.3 126.1 3.7 552.0 19.2 23.0 6.75 6.40 15.70 - 0.02 0.83 2.40 1.44 7.63
1974 73.9 132.8 2.3 648.9 18.2 17.8 6.69 6.65 15.56 - 0.02 0.82 2.57 1.38 8.00
1975 56.9 108.1 1.7 729.3 19.2 23.0 7.71 7.01 15.57 - 0.02 0.84 2.85 1.63 8.51
1976 94.0 158.8 3.0 773.2 21.5 20.1 8.83 8.41 15.19 - 0.03 0.94 3.34 1.76 9.71
1977 278.4 358.1 5.9 856.1 20.9 16.0 15.56 8.87 15.49 - 0.03 1.02 3.82 1.81 10.36
1978 397.3 482.2 5.6 1,114.3 40.8 15.5 15.51 15.61 29.97 - 0.07 1.91 7.77 3.46 19.55
1979 516.1 624.9 5.2 1,245.7 37.0 13.0 15.45 15.57 33.04 - 0.07 1.92 8.50 3.66 20.12
1980 245.5 375.9 2.2 1,666.8 41.4 12.4 18.00 16.53 38.46 - 0.07 2.10 9.10 3.91 21.52
1981 334.7 448.8 2.9 2,060.4 46.7 16.8 20.55 19.25 39.03 - 0.09 2.22 8.52 3.54 22.69
1982 358.8 526.9 3.2 2,500.0 52.4 18.6 21.32 20.81 36.43 - 0.08 2.20 8.58 3.17 22.98
1983 316.0 521.0 3.3 2,651.7 51.3 21.6 25.00 23.53 35.69 - 0.10 2.33 9.22 3.09 25.15
1984 522.2 720.8 4.5 2,983.8 49.4 17.5 26.28 25.44 33.99 - 0.11 2.24 8.94 2.91 26.07
1985 461.2 672.0 3.9 3,440.7 57.6 21.0 27.41 27.16 35.21 - 0.11 2.20 9.23 3.02 27.58
1986 362.9 606.9 3.7 4,082.4 63.7 26.2 28.52 28.02 41.10 - 0.17 2.22 12.90 4.05 32.87
1987 299.5 600.7 3.5 4,770.6 71.4 27.5 30.76 29.45 48.26 - 0.20 2.27 16.38 3.27 38.10
1988 277.5 576.0 3.1 4,908.9 70.3 28.6 33.03 31.81 56.66 - 0.25 2.29 18.11 5.34 42.76
1989 291.4 584.6 3.2 5,146.0 73.6 24.2 40.00 36.05 59.11 - 0.26 2.22 19.17 5.65 46.19
1990 435.0 856.7 3.8 5,783.1 72.0 17.8 40.24 40.06 71.50 - 0.28 2.29 24.80 7.36 54.42
1991 718.4 1,156.0 4.6 6,489.4 72.1 18.5 42.58 41.37 73.20 - 0.31 1.82 25.10 7.33 56.61
1992 936.4 1,439.9 4.9 6,831.7 70.4 17.1 46.00 43.83 77.38 - 0.35 1.69 28.14 8.30 61.75
1993 1,674.7 2,123.8 6.4 7,602.0 73.4 13.8 49.56 48.25 72.47 - 0.44 1.58 29.19 8.52 67.39
1994 (f) 2,022.0 2,874.4 7.2 8,298.0 70.8 13.7 49.98 49.42 75.68 - 0.48 1.58 30.50 8.92 70.75
1995 2,063.0 2,901.9 6.6 8,694.0 66.7 16.5 54.05 51.25 80.88 - 0.55 1.58 35.81 10.29 77.74
1996 1,937.0 2,717.0 6.0 8,486.0 61.1 15.3 56.71 55.27 86.34 - 0.51 1.56 36.75 10.81 80.23
1997 2,029.0 3,132.0 6.4 8,197.0 54.3 13.3 61.29 58.99 96.69 - 0.49 1.63 34.07 10.12 81.17
1998 1,984.0 2,907.0 5.9 8,749.0 55.5 13.3 67.78 64.59 107.05 - 0.50 1.57 36.80 10.98 87.66
1999 1,639.0 2,582.0 5.2 9,088.0 57.8 15.2 72.12 70.39 113.91 - 0.62 1.64 38.39 11.45 96.25
2000 1,049.0 2,131.2 3.5 9,031.0 54.5 14.7 80.06 75.78 114.78 74.32 0.70 1.68 35.76 10.66 99.90
2001 1,338.0 2,238.0 4.5 8,372.0 53.2 13.2 93.16 89.36 128.66 82.27 0.74 1.89 40.90 12.19 113.75
2002 1,700.0 2,495.0 4.9 9,333.0 56.3 13.2 96.73 95.66 143.74 101.38 0.76 1.97 46.37 13.79 123.93
2003 2,329.0 3,218.0 5.8 10,735.0 56.9 11.6 96.74 96.52 157.71 121.60 0.83 2.07 - - 135.22
2004 2,195.8 3,439.0 5.2 11,346.0 54.9 11.6 104.61 101.19 185.35 125.79 0.94 2.23 - - 149.88
2005 2,735.0 4,200.5 5.7 11,353.8 46.5 7.9 102.12 100.50 182.87 125.10 0.91 2.28 - - 148.45
2006 2,836.7 4,005.4 4.7 11,981.4 42.4 12.7 107.71 103.96 191.53 130.63 0.89 2.30 - - 153.00
2007 3,508.2 4,956.4 5.3 13,989.5 43.2 13.1 108.72 110.62 221.46 151.63 0.94 2.69 - - 169.37
2008 2,560.9 3,639.8 3.1 15,106.6 37.1 18.0 113.14 108.33 200.73 159.32 1.05 2.52 - - 171.24
2009 5,357.4 7,030.4 8.3 18,662.1 44.4 22.4 114.38 114.94 179.87 160.21 1.23 2.39 - - 177.22
2010 7,196.5 8,620.8 7.7 21,437.9 37.8 16.7 110.95 113.06 174.81 150.10 1.29 2.49 - - 172.50
2011 6,749.3 7,990.7 4.7 32,747.9 50.2 13.2 113.90 110.57 177.23 153.86 1.39 2.39 - - 174.54
2012 7,105.8 8,586.8 5.4 37,098.1 62.5 19.7 127.16 127.60 202.28 164.01 1.60 2.39 - - 195.38
2013 7,495.0 8,573.5 5.7 39,905.3 53.7 26.8 130.75 129.11 202.08 171.51 1.32 2.21 - - 196.19
2014 8,208.4 9,884.4 6.1 42,914.1 54.1 21.7 131.05 130.56 215.16 173.47 1.24 2.14 - - 198.35
2015 7,303.6 9,336.9 5.9 44,839.4 52.7 28.2 144.06 135.94 207.99 150.84 1.12 2.12 - - 190.16
2016 6,019.0 8,432.9 5.3 46,418.0 52.8 25.6 149.80 145.60 197.15 161.16 1.34 2.17 - - 202.39
2017 7,958.7 10,436.5 6.0 51,603.9 54.7 23.9 152.85 152.46 196.47 171.73 1.36 2.34 - - 211.49
2018 6,919.2 9,582.9 5.2 52,411.8 55.3 28.9 182.75 162.54 216.67 191.71 1.47 2.38 - - 229.90
2019 7,642.4 10,401.9 6.3 54,811.5 61.6 29.7 181.63 178.78 228.20 200.14 1.64 2.54 - - 246.97
2020 5,664.3 8,520.7 6.4 49,041.3 58.1 (g) 35.2 186.41 185.52 238.22 212.07 1.74 2.50 - - 258.61
2021 3,139.2 6,122.4 3.6 51,775.1 58.4 (g) 30.7 200.43 198.88 273.51 235.10 1.81 2.69 - - 283.18
2022 (g) 1,897.6 5,873.5 3.9 49,666.9 64.6 15.4 363.11 324.55 396.89 339.04 2.44 4.11 - - 431.91
2023 (h) 4,392.1 9,373.1 6.7 54,831.6 65.0 14.9 323.92 327.53 407.07 354.11 2.34 3.97 - - 436.88
Sources: International Monetary Fund
(a) Excludes foreign assets in the form of ‘Direct investment abroad’ and ‘Trade credit and advances granted’. Central Bank of Sri Lanka
(b) Total external debt includes banking sector liabilities, from 2011.
(c) From 2015 onwards, data is based on the base year (2015) GDP estimates of DCS.
(d) As a percentage of earnings from exports of goods and services. Debt service payments were reclassified to capture debt servicing of foreign holding
of Treasury bills and bonds in accordance with the External Debt Statistics Manual (2003) of the International Monetary Fund (IMF), from 2008.
(e) Special Drawing Rights (SDR), the unit of account of the IMF.
(f) Offshore Banking Units are treated as a part of the domestic banking system, from 1994.
(g) Revised
(h) Provisional
Special Statistical Appendix Trends in Key Economic Variables
FISCAL SECTOR TABLE 6
Government Fiscal Operations (a) Values in Rs. million
Revenue Expenditure Financing As a % of GDP (d)
Grants Revenue Current Primary Overall
and Account Account Surplus(+)/
Total Capital Privati- Overall
Year Grants Sur- Sur- Deficit(-) Revenue
Tax (Tax and and Net sation Total Expend- Sur-
(b) Recurrent Lending Total plus(+) plus(+) Foreign Domestic (c) and
Non Tax) Deficit(-) Deficit(-) Pro- Financing iture plus(+)
Grants
ceeds /Deficit (-)

1970 2,507 2,736 63 2,799 2,659 1,013 3,672 77 -620 -873 163 710 - 873 20.5 26.9 -6.4
1971 2,354 2,815 60 2,875 2,981 918 3,899 -166 -688 -1,024 175 849 - 1,024 20.5 27.8 -7.3
1972 2,676 3,282 75 3,357 3,386 931 4,317 -104 -548 -961 209 752 - 961 22.0 28.3 -6.3
1973 3,331 4,034 47 4,081 3,857 1,169 5,026 177 -431 -945 132 813 - 945 22.2 27.3 -5.1
1974 4,013 4,787 252 5,039 4,506 1,316 5,822 281 -203 -783 126 657 - 783 21.2 24.5 -3.3
1975 4,258 5,084 404 5,488 5,153 2,033 7,186 -69 -999 -1,698 310 1,388 - 1,698 20.6 27.0 -6.4
1976 4,726 5,739 367 6,106 5,554 3,098 8,652 185 -1,707 -2,547 591 1,956 - 2,547 20.2 28.6 -8.4
1977 5,509 6,686 501 7,187 6,148 2,665 8,813 538 -613 -1,626 754 872 - 1,626 19.7 24.2 -4.5
1978 10,320 11,688 661 12,349 10,408 7,280 17,688 1,280 -3,999 -5,339 3,292 2,047 - 5,339 28.9 41.5 -12.5
1979 11,015 11,966 1,390 13,356 10,825 8,367 19,192 1,141 -4,169 -5,836 2,348 3,488 - 5,836 25.5 36.6 -11.1
1980 12,158 13,022 2,620 15,642 12,319 16,069 28,388 703 -10,505 -12,746 3,516 9,230 - 12,746 23.5 42.7 -19.2
1981 13,696 14,775 2,721 17,496 14,649 13,365 28,014 126 -6,780 -10,518 4,880 5,638 - 10,518 20.6 33.0 -12.4
1982 14,737 16,210 3,376 19,586 18,341 15,171 33,512 -2,131 -8,822 -13,926 4,744 9,182 - 13,926 19.7 33.8 -14.0
1983 19,912 23,317 3,473 26,790 22,002 17,635 39,637 1,315 -6,241 -12,847 6,372 6 ,475 - 12,847 22.0 32.6 -10.6
1984 29,939 34,061 3,293 37,354 24,630 23,207 47,837 9,431 -3,745 -10,483 6,492 3,991 - 10,483 24.3 31.1 -6.8
1985 30,442 36,249 3,307 39,556 32,645 22,589 55,234 3,604 -8,250 -15,678 7,109 8,569 - 15,678 24.4 34.0 -9.7
1986 31,272 37,238 3,753 40,991 33,966 25,227 59,193 3,272 -9,440 -18,202 9,061 9,141 - 18,202 22.8 33.0 -10.1
1987 35,119 42,145 4,677 46,822 39,560 24,334 63,894 2,585 -6,915 -17,072 5,716 11,356 - 17,072 23.8 32.5 -8.7
1988 35,946 41,749 6,588 48,337 46,132 30,400 76,532 -4,383 -15,605 -28,195 7,128 21,067 - 28,195 21.8 34.5 -12.7
1989 47,513 53,979 6,407 60,386 56,884 25,280 82,164 -2,905 -7,426 -21,778 5,926 15,852 - 21,778 24.0 32.6 -8.6
1990 61,206 67,964 6,698 74,662 71,771 28,043 99,814 -3,807 -4,484 -25,152 11,644 13,508 - 25,152 23.2 31.0 -7.8
1991 68,157 76,179 7,870 84,049 83,756 36,613 120,369 -7,577 -14,247 -36,320 19,329 16,149 841 36,320 22.6 32.3 -9.8
1992 76,353 85,781 8,280 94,061 89,639 30,186 119,824 -3,858 177 -25,763 7,361 15,551 2,850 25,763 22.1 28.2 -6.1
1993 85,891 98,339 8,025 106,364 102,288 39,371 141,659 -3,949 -5,092 -35,295 9,855 24,241 1,200 35,295 21.3 28.4 -7.1
1994 99,417 110,038 8,257 118,295 127,084 43,680 170,764 -17,046 -14,439 -52,470 11,778 37,696 2,995 52,470 20.4 29.5 -9.1
1995 118,543 136,258 9,028 145,286 154,159 49,325 203,484 -17,901 -19,972 -58,198 21,224 33,972 3,001 58,198 21.8 30.5 -8.7
1996 130,202 146,279 7,739 154,018 175,148 43,512 218,660 -28,869 -15,719 -64,642 10,160 49,754 4,728 64,642 20.1 28.5 -8.4
1997 142,512 165,036 7,329 172,365 184,749 50,348 235,097 -19,713 -7,486 -62,732 9,958 30,275 22,499 62,732 19.4 26.4 -7.0
1998 147,368 175,032 7,200 182,232 199,648 68,531 268,179 -24,616 -31,049 -85,947 10,197 71,362 4,389 85,947 17.9 26.3 -8.4
1999 166,029 195,905 6,761 202,666 207,271 71,888 279,159 -11,366 -14,370 -76,493 1,484 74,876 134 76,493 18.3 25.2 -6.9
2000 182,392 211,282 5,145 216,427 254,279 81,544 335,823 -42,997 -48,196 -119,396 495 118,500 401 119,396 17.2 26.7 -9.5
2001 205,840 234,296 5,500 239,796 303,361 83,157 386,518 -69,065 -52,415 -146,722 14,538 123,595 8,589 146,722 17.0 27.5 -10.4
2002 221,839 261,888 7,079 268,967 330,847 72,142 402,990 -68,959 -17,507 -134,022 1,978 126,351 5,693 134,022 17.0 25.4 -8.5
2003 231,597 276,465 7,956 284,421 334,694 82,979 417,673 -58,229 -8,125 -133,251 43,117 79,911 10,223 133,251 15.6 22.9 -7.3
2004 281,552 311,473 8,681 320,154 389,679 87,228 476,907 -78,206 -36,970 -156,752 37,071 117,243 2,437 156,752 15.3 22.8 -7.5
2005 336,828 379,746 32,640 412,387 443,350 141,433 584,783 -63,603 -52,237 -172,396 47,773 123,604 1,020 172,396 16.8 23.8 -7.0
2006 428,378 477,833 30,068 507,901 547,960 165,687 713,646 -70,127 -54,968 -205,745 41,942 163,805 - 205,745 17.3 24.3 -7.0
2007 508,947 565,051 30,508 595,559 622,758 218,846 841,604 -57,707 -63,364 -246,045 100,907 145,137 - 246,045 16.6 23.5 -6.9
2008 585,621 655,259 31,222 686,482 743,710 252,416 996,126 -88,450 -97,169 -309,644 -4,643 314,287 - 309,643 15.6 22.6 -7.0
2009 618,933 699,644 25,922 725,566 879,575 322,352 1,201,927 -179,931 -166,686 -476,361 230,807 245,554 - 476,361 15.0 24.9 -9.9
2010 724,747 817,279 16,909 834,188 937,094 343,111 1,280,205 -119,815 -93,425 -446,017 243,788 202,229 - 446,017 12.6 19.3 -6.7
2011 845,697 967,862 15,141 983,003 1,024,906 408,276 1,433,182 -57,043 -93,481 -450,180 218,956 231,224 - 450,180 13.1 19.1 -6.0
2012 908,913 1,051,460 16,071 1,067,532 1,131,023 425,476 1,556,499 -79,563 -80,469 -488,967 286,455 202,511 - 488,967 11.9 17.3 -5.4
2013 1,005,895 1,137,447 15,859 1,153,306 1,205,180 464,216 1,669,396 -67,733 -72,083 -516,090 123,700 392,390 - 516,090 11.6 16.8 -5.2
2014 1,050,362 1,195,206 9,415 1,204,621 1,322,898 472,967 1,795,865 -127,692 -154,849 -591,244 212,523 378,721 - 591,244 11.2 16.7 -5.5
2015 1,355,779 1,454,878 6,014 1,460,892 1,701,658 588,737 2,290,394 -246,779 -319,828 -829,502 236,803 592,699 - 829,502 12.6 19.8 -7.2
2016 1,463,689 1,686,062 7,496 1,693,558 1,757,782 576,101 2,333,883 -71,719 -29,430 -640,325 391,914 248,411 - 640,325 13.2 18.2 -5.0
2017 1,670,178 1,831,531 8,031 1,839,562 1,927,693 645,363 2,573,056 -96,162 2,071 -733,494 439,243 294,251 - 733,494 12.8 17.9 -5.1
2018 1,712,318 1,919,973 12,486 1,932,459 2,089,713 603,515 2,693,228 -169,740 91,421 -760,769 323,535 437,234 - 760,769 12.6 17.5 -5.0
2019(e) 1,734,925 1,890,899 7,909 1,898,808 2,424,582 913,314 3,337,896 -533,683 -537,736 -1,439,088 542,641 896,448 - 1,439,088 11.9 21.0 -9.0
2020 1,216,542 1,367,960 5,348 1,373,308 2,548,359 492,638 3,040,996 -1,180,399 -687,386 -1,667,688 -83,199 1,750,887 - 1,667,688 8.8 (f) 19.4 (f) -10.7 (f)
2021 1,298,019 1,457,071 6,740 1,463,810 2,747,512 774,223 3,521,735 -1,290,441 -1,009,542 -2,057,925 -13,901 2,071,826 - 2,057,925 8.3 (f) 20.0 (f) -11.7 (f)
2022 1,751,132 1,979,184 33,405 2,012,589 3,519,633 952,923 4,472,556 -1,540,448 -894,777 -2,459,967 424,822 2,035,145 - 2,459,967 8.4 (f) 18.6 (f) -10.2 (f)
2023(g) 2,720,563 3,048,822 25,502 3,074,324 4,699,679 656,912 5,356,591 -1,650,857 173,332 -2,282,267 494,655 1,787,612 - 2,282,267 11.1 19.4 -8.3

(a) Data from 1979 are based on the economic format. Sources: Ministry of Finance, Economic Stabilization &
(b) Financial year was from 1 October to 30 September until 1973. From 1973, it was changed to the calendar year. National Policies
Central Bank of Sri Lanka
(c) Includes proceeds from the long lease of Hambantota Port received in 2017 and 2018
(d) Data is based on GDP estimates compiled by DCS. From 2010 onwards, data is based on revised GDP estimates (base year 2015) of
DCS.
(e) According to the Ministry of Finance, the fiscal sector statistics of 2019 have been restated as announced in the Budget Speech for 2020.
(f) Revised based on the revised GDP estimates for 2020-2022 released on 15 March 2024 by DCS.
(g) Provisional
Special Statistical Appendix Trends in Key Economic Variables
FISCAL SECTOR TABLE 7
Central Government Debt (a) Values in Rs. million
Domestic Debt (c) As a % of GDP (f)
Year (b) Treasury Rupee Treasury Other Total Foreign Total Domestic Foreign Total
Bills (d) Loans Bonds (e) Debt (d)(e) Debt
1970 1,950 3,925 - 420 6,295 2,394 8,689 46.1 17.5 63.6
1971 2,025 4,512 - 446 6,983 2,795 9,778 49.7 19.9 69.6
1972 2,325 5,103 - 498 7,926 2,936 10,862 52.0 19.3 71.2
1973 2,250 5,812 - 522 8,584 3,705 12,289 46.6 20.1 66.8
1974 2,250 6,591 - 604 9,445 2,859 12,304 39.7 12.0 51.8
1975 2,350 7,560 - 949 10,859 3,705 14,564 40.9 13.9 54.8
1976 2,700 9,001 - 990 12,691 4,968 17,659 42.0 16.4 58.5
1977 2,500 10,391 - 1,501 14,392 10,593 24,985 39.5 29.1 68.6
1978 2,635 12,049 - 1,684 16,368 14,583 30,951 38.4 34.2 72.5
1979 3,000 14,929 - 1,705 19,634 15,840 35,474 37.5 30.2 67.7
1980 9,800 17,611 - 1,659 29,070 22,276 51,346 43.7 33.5 77.2
1981 13,920 20,025 - 1,573 35,518 29,172 64,690 41.8 34.3 76.1
1982 17,320 25,800 - 2,147 45,267 35,267 80,534 45.6 35.5 81.2
1983 17,400 31,953 - 2,416 51,769 46,688 98,457 42.6 38.4 81.0
1984 14,860 33,228 - 3,564 51,652 53,681 105,333 33.6 34.9 68.5
1985 22,280 36,570 - 3,761 62,611 67,673 130,284 38.6 41.7 80.2
1986 26,173 39,130 - 4,196 69,499 86,208 155,707 38.7 48.0 86.8
1987 29,850 44,957 - 4,190 78,997 111,812 190,809 40.2 56.8 97.0
1988 43,700 49,797 - 5,099 98,596 125,657 224,253 44.4 56.6 101.0
1989 57,246 54,217 - 6,099 117,562 156,298 273,860 46.7 62.0 108.7
1990 67,968 54,677 - 11,251 133,896 176,883 310,779 41.6 55.0 96.6
1991 72,968 66,823 - 12,328 152,119 214,579 366,698 40.9 57.6 98.5
1992 87,096 69,180 - 13,744 170,020 235,539 405,559 40.0 55.4 95.4
1993 97,196 105,707 - 10,782 213,685 270,224 483,909 42.8 54.1 96.9
1994 98,896 137,554 - 12,669 249,119 301,812 550,931 43.0 52.1 95.1
1995 113,771 157,928 - 17,711 289,410 346,286 635,696 43.3 51.9 95.2
1996 124,996 205,975 - 25,731 356,703 359,685 716,388 46.4 46.8 93.3
1997 114,996 239,475 10,000 23,269 387,740 376,331 764,071 43.6 42.3 85.8
1998 119,996 250,570 48,915 43,945 463,426 461,273 924,699 45.5 45.3 90.8
1999 124,996 262,056 104,867 51,546 543,465 507,866 1,051,331 49.1 45.9 95.1
2000 134,996 263,888 204,124 73,652 676,660 542,040 1,218,700 53.8 43.1 96.9
2001 170,995 292,813 229,174 122,983 815,965 636,741 1,452,706 58.0 45.3 103.3
2002 210,995 287,701 347,128 102,562 948,386 721,957 1,670,343 60.0 45.6 105.6
2003 219,295 248,414 487,504 69,153 1,024,366 843,882 1,868,248 56.2 46.3 102.5
2004 243,886 164,758 647,746 91,396 1,147,786 996,138 2,143,924 54.9 47.6 102.5
2005 234,174 140,563 755,966 139,415 1,270,119 956,620 2,226,739 51.8 39.0 90.8
2006 257,732 116,713 890,369 218,813 1,483,627 1,103,418 2,587,045 50.5 37.5 88.0
2007 307,012 131,509 1,023,249 257,825 1,719,595 1,326,487 3,046,082 47.9 37.1 85.1
2008 402,600 130,009 1,286,375 325,641 2,144,625 1,448,734 3,593,359 48.6 32.8 81.5
2009 441,032 112,292 1,517,909 334,119 2,405,352 1,760,467 4,165,819 49.7 36.4 86.2
2010 514,442 87,709 1,648,284 319,624 2,570,059 2,024,583 4,594,642 38.8 30.5 69.3
2011 590,885 61,961 1,823,648 331,988 2,808,482 2,329,280 5,137,762 37.5 31.1 68.6
2012 629,070 58,386 2,177,892 450,303 3,315,651 2,767,299 6,082,950 36.9 30.8 67.7
2013 700,137 55,518 2,548,323 624,810 3,928,788 2,960,424 6,889,212 39.5 29.8 69.3
2014 694,767 55,518 2,940,017 683,444 4,373,746 3,113,116 7,486,862 40.6 28.9 69.5
2015 658,240 24,088 3,401,211 971,620 5,055,159 3,544,031 8,599,190 43.7 30.6 74.3
2016 779,581 24,088 3,806,353 823,051 5,433,073 4,045,796 9,478,869 42.4 31.6 74.0
2017 697,154 24,088 3,892,408 1,050,565 5,664,215 4,718,618 10,382,832 39.4 32.8 72.2
2018 746,887 24,088 4,197,323 1,102,703 6,071,001 5,959,547 12,030,548 39.5 38.8 78.4
2019 873,943 24,088 4,606,232 1,325,997 6,830,260 6,201,283 13,031,543 42.9 39.0 81.9
2020 (g) 1,620,705 24,088 5,713,300 1,706,975 9,065,068 6,052,179 15,117,247 57.9 38.7 96.6
2021 2,270,508 24,088 6,966,218 1,836,410 11,097,223 6,516,958 (h) 17,614,181 63.0 37.0 100.0
2022 (i)(j) 4,113,907 24,088 8,709,057 2,186,824 (k) 15,033,876 (k) 12,458,155 (h)(l) 27,492,031 62.5 (k) 51.8 (l) 114.2 (k)(l)
2023 (i)(j) 4,017,035 - 12,002,337 1,032,482 (k) 17,051,854 (k) 11,644,094 (h)(l) 28,695,949 61.7 (k) 42.1 (l) 103.9 (k)(l)
(a) As per the guidelines of compiling government debt statistics in the Manual of Government Finance Statistics published by the IMF in 2014, non resident Sources: Ministry of Finance, Economic
holdings of outstanding SLDBs have been classified under foreign debt and resident holdings of outstanding ISBs of the Sri Lankan Government have been Stabilization & National Policies
classified under domestic debt from 2019 onwards. Further, debt statistics are presented on net basis (net of deposits). Central Bank of Sri Lanka
(b) From 1950 to 1973, the outstanding balance is reported as at end September and thereafter as at end December.
(c) From 2023 onwards, domestic debt compilation method was changed and is based on the data confirmed by the Ministry of Finance, Economic
Stabilization & National Policies.
(d) Rupee denominated Treasury bills issued to foreign investors from 2008 onwards are excluded from domestic debt and included in foreign debt.
(e) Rupee denominated Treasury bonds issued to foreign investors from 2007 onwards are excluded from domestic debt and included in foreign debt.
(f) Data are based on GDP estimates compiled by DCS. From 2010 onwards, data are based on the GDP estimates (base year 2015) of DCS.
GDP estimates for 2020 - 2022 are revised based on the GDP estimates released on 15 March 2024 by DCS.
(g) The central government debt statistics at end 2019 could increase should the adjustment for payment arrears in government expenditure as per the
Ministry of Finance be incorporated into the net financing of the budget deficit in 2019. However, such an adjustment would have no impact on the
outstanding central government debt at end 2020.
(h) Foreign loan debt statistics and classification of foreign debt for 2021, 2022 and 2023 are prepared based on the data sourced from the CS-DRMS
maintained by the Ministry of Finance, Economic Stabilization & National Policies, and extracted on 09 March 2023, 10 March 2023 and 26 February
2024.
(i) Provisional
(j) The outstanding central government debt excludes several debt service payments that became overdue after 12 April 2022, the date of which the Interim
Policy regarding the servicing of Sri Lanka’s external public debt was announced by the Ministry of Finance, Economic Stabilization & National Policies.
These debt service payments comprise of overdue interest payments of affected debt which deemed to be capitalised as per the Interim Policy. Further,
December 2022 balances excluded several overdue interest payements in relation to SLDBs from April 2022 till end 2022.
(k) Includes outstanding balance of the government guaranteed foreign currency debt of the Ceylon Petroleum Corporation that was absorbed into central
government debt
(l) From December 2022 onwards, several outstanding project loans which were previously classified under Ceylon Electricity Board, Airport and Aviation
Services Ltd. and Sri Lanka Ports Authority were absorbed into central government debt.
Special Statistical Appendix Trends in Key Economic Variables
MONETARY SECTOR TABLE 8

Monetary Survey (M2b)(a)(b) Values in Rs. million

Net Foreign Assets (NFA) Net Domestic Assets (NDA) (c) Money
End Currency Demand Narrow Broad Broad Claims on Multiplier
Velocity
Period Deposits Money Money Money Reserve
Monetary Commer- Total Govern- Public Private Total M1 M2 M2b of Money
(d) Supply Supply Supply Money
Authorities cial ment Corporations/ Sector (M2b)
(M1) (M2) (M2b)
(e)(f) Banks (Net) SOBEs
(g)
1970 935 1,032 1,967 3,115 - - - - - - - - 1,324 1.49 2.35 - -
1971 1,115 1,034 2,149 3,435 - - - - - - - - 1,495 1.44 2.30 - -
1972 1,202 1,279 2,481 3,974 - - - - - - - - 1,773 1.40 2.24 - -
1973 1,437 1,341 2,778 4,154 - - - - - - - - 2,158 1.29 1.92 - -
1974 1,539 1,406 2,946 4,569 - - - - - - - - 2,256 1.31 2.03 - -
1975 1,610 1,478 3,088 4,777 - - - - - - - - 2,144 1.44 2.23 - -
1976 2,081 2,085 4,166 6,321 - - - - - - - - 2,700 1.54 2.34 - -
1977 2,792 2,574 5,366 8,717 - - - - - - - - 3,840 1.40 2.27 - -
1978 3,016 2,921 5,936 10,891 - - - - - - - - 4,262 1.39 2.56 - -
1979 3,774 3,895 7,669 15,057 - - - - - - - - 5,299 1.45 2.84 - -
1980 4,181 5,247 9,428 19,860 - - - - - - - - 6,286 1.50 3.16 - -
1981 4,823 5,202 10,024 24,447 - - - - - - - - 7,505 1.34 3.26 - -
1982 5,988 5,772 11,760 30,510 - - - - - - - - 9,119 1.29 3.35 - -
1983 7,200 7,548 14,748 37,257 - - - - - - - - 11,642 1.27 3.20 - -
1984 8,561 8,263 16,824 43,427 - - - - - - - - 13,710 1.23 3.17 - -
1985 9,816 8,946 18,761 48,409 - - - - - - - - 16,895 1.11 2.87 - -
1986 11,570 9,609 21,179 50,860 - - - - - - - - 18,031 1.17 2.82 - -
1987 13,495 11,588 25,083 58,335 - - - - - - - - 19,273 1.30 3.03 - -
1988 18,487 13,892 32,379 67,946 - - - - - - - - 25,564 1.27 2.66 - -
1989 19,650 15,688 35,338 76,434 - - - - - - - - 26,791 1.32 2.85 - -
1990(h) 22,120 17,477 39,597 90,546 - - - - - - - - 31,579 1.25 2.87 - -
1991 24,852 21,748 46,600 110,575 120,347 9,836 468 10,304 35,747 19,812 87,767 110,043 40,056 1.16 2.76 3.00 3.09 (i)
1992 27,281 22,776 50,057 129,799 143,822 18,730 -3,493 15,237 33,946 23,174 110,877 128,585 44,858 1.12 2.89 3.21 3.27
1993 32,133 27,222 59,355 160,136 180,486 51,392 -9,527 41,865 29,766 15,414 134,181 138,622 56,468 1.05 2.84 3.20 3.12
1994 38,906 31,555 70,461 191,670 214,306 64,571 -5,811 58,760 31,362 11,407 163,278 155,546 68,055 1.04 2.82 3.15 2.98
1995 42,198 33,019 75,217 228,536 259,442 73,662 -8,917 64,745 38,662 13,305 210,703 194,696 78,586 0.96 2.91 3.30 2.89
1996 42,565 35,638 78,203 253,201 288,657 73,541 -10,467 63,074 47,131 15,491 229,773 225,582 85,509 0.91 2.96 3.38 2.80
1997 45,679 40,172 85,852 288,258 333,668 89,930 565 90,495 45,250 14,598 263,198 243,172 83,736 1.03 3.44 3.98 2.89
1998 51,767 44,502 96,269 316,174 377,740 101,744 3,904 105,648 64,618 10,031 294,868 272,091 92,866 1.04 3.40 4.07 2.89
1999 58,481 50,074 108,555 358,076 428,319 89,287 12,805 102,092 93,915 13,046 325,927 326,228 100,444 1.08 3.56 4.26 2.76
2000 62,646 55,831 118,477 404,669 483,421 57,947 11,582 69,529 147,304 38,254 364,369 413,892 105,163 1.13 3.85 4.60 2.80
2001 65,536 56,674 122,210 450,726 549,138 84,346 -10,216 74,130 201,311 40,811 396,754 475,009 112,522 1.09 4.01 4.88 2.77
2002 75,292 64,069 139,361 510,395 622,495 117,376 -6,733 110,643 192,994 43,031 444,371 511,852 126,411 1.10 4.04 4.92 2.69
2003 85,601 76,034 161,635 580,747 717,855 164,596 2,497 167,093 176,236 36,192 519,444 550,760 141,447 1.14 4.11 5.08 2.74
2004 99,669 88,784 188,453 687,964 858,644 151,694 18,523 170,218 220,462 41,171 634,310 688,427 170,967 1.10 4.02 5.02 2.69
2005 114,070 116,632 230,702 822,931 1,022,277 196,925 4,405 201,330 249,565 16,672 801,149 820,948 197,932 1.17 4.16 5.16 2.63
2006 135,019 124,666 259,685 993,264 1,204,550 229,860 -58,669 171,191 357,289 31,555 993,159 1,033,360 239,863 1.08 4.14 5.02 2.66
2007 147,183 119,409 266,592 1,147,742 1,404,019 292,927 -64,935 227,992 374,101 49,167 1,184,519 1,176,027 264,419 1.01 4.34 5.31 2.73
2008 155,023 122,300 277,323 1,282,194 1,522,776 148,157 -70,457 77,700 582,907 46,991 1,267,601 1,445,076 268,425 1.03 4.78 5.67 3.01
2009 181,840 154,870 336,710 1,536,755 1,806,169 412,202 -10,323 401,880 640,326 73,233 1,194,189 1,404,288 303,537 1.11 5.06 5.95 2.90
2010 216,549 190,643 407,192 1,813,000 2,091,408 505,463 -128,021 377,442 627,185 144,578 1,491,099 1,713,966 360,511 1.13 5.03 5.80 3.45
2011 242,871 195,836 438,707 2,192,603 2,491,740 340,090 -242,033 98,057 833,610 198,500 2,005,860 2,393,683 439,504 1.00 4.99 5.67 3.27
2012 251,539 198,510 450,049 2,593,185 2,929,070 396,468 -422,299 -25,831 1,045,232 292,477 2,358,421 2,954,901 484,362 0.93 5.35 6.05 3.27
2013 264,607 219,971 484,578 3,058,793 3,417,853 529,128 -605,453 -76,325 1,301,342 365,098 2,534,343 3,494,178 488,586 0.99 6.26 7.00 3.10
2014 329,426 282,729 612,155 3,460,558 3,875,853 688,007 -672,881 15,126 1,435,900 450,924 2,753,322 3,860,727 577,912 1.06 5.99 6.71 2.97
2015 388,057 326,931 714,988 4,057,212 4,565,917 576,187 -874,350 -298,163 1,759,492 530,669 3,441,874 4,864,081 673,432 1.06 6.02 6.78 2.76
2016 429,502 347,123 776,624 4,823,559 5,405,596 558,589 -789,827 -231,238 1,972,133 513,768 4,185,777 5,636,834 856,147 0.91 5.63 6.31 2.59
2017 439,396 353,903 793,299 5,665,313 6,308,062 846,139 -724,601 121,538 2,168,517 536,982 4,799,215 6,186,524 939,793 0.84 6.03 6.71 2.43
2018 473,066 357,727 830,793 6,427,330 7,128,297 750,541 -817,548 -67,007 2,516,711 755,380 5,561,351 7,195,304 961,096 0.86 6.69 7.42 2.27
2019 494,208 371,259 865,467 6,912,710 7,624,121 895,997 -795,296 100,702 2,795,927 817,953 5,796,859 7,523,419 932,604 0.93 7.41 8.18 2.16
2020 641,010 536,140 1,177,150 8,495,788 9,405,734 526,779 -736,247 -209,468 4,548,061 1,002,174 6,170,937 9,615,202 964,440 1.22 8.81 9.75 1.84
2021 784,450 675,446 1,459,895 9,638,905 10,647,309 -387,263 -594,713 -981,976 5,832,420 1,188,103 6,981,428 11,629,285 1,305,809 1.12 7.38 8.15 1.73
2022 742,042 711,555 1,453,597 10,497,052 12,289,637 -1,613,861 -152,952 -1,766,813 7,471,108 1,749,708 (j) 7,411,456 (j) 14,056,450 1,349,389 1.08 7.78 9.11 2.04 (j)
2023 900,136 757,906 1,658,043 11,485,069 13,189,113 -837,336 381,238 -456,098 8,284,991 769,810 7,366,418 13,645,211 1,328,737 1.25 8.64 9.93 2.19

(a) All values except Money Multiplier and Velocity of Money are in Rs. million Source: Central Bank of Sri Lanka
(b) M2b is based on the aggregated data pertaining to the Central Bank, and both Domestic Banking Units (DBUs) and Offshore Banking Units (OBUs) of LCBs operating
in Sri Lanka. Definitional changes have been adopted in aggregating DBUs and OBUs to avoid double counting and misclassification of assets and liabilities.
(c) NDA is equal to the sum of net credit to Government (NCG), claims on public corporations/State Owned Business Enterprises (SOBEs), claims on private sector and
other items (net).
(d) Demand deposits held by the public
(e) This includes NFA of the Central Bank as well as the Government’s Crown Agent’s balance reported by the Department of State Accounts.
(f) The Central Bank adopted International Accounting Standards in January 2002. Accordingly, since then foreign assets are recorded at market value, which reflects its
impact in NFA and NDA of Monetary Authorities. Therefore, the values for the period prior to January 2002 are not comparable with the values thereafter.
(g) Credit extended to the Government by the banking system, net of government deposits with banks and government’s cash balances.
(h) Monetary data since 1990 were reclassifed to be consistent with standard international practices. Accordingly, rupee deposits held by non-residents are excluded from
the total demand, time and savings deposits held by the public. The excluded amount is classified under foreign liabilities.
(i) Velocity of money, which is calculated based on annual average M2b is computed based on year-end M2b only for 1991.
(j) Revised
Special Statistical Appendix Trends in Key Economic Variables
MONETARY SECTOR TABLE 9

Interest Rates Per cent per annum

Government Securities Commercial Banks Legal
End SDFR SLFR SRR Lending Rates on Loans Bank Rate
Period (a) (b) (c) Primary Market Yields Average Deposit Rates Rate (d) of
Secured by
Weighted Interest/
91-day 182-day 364-day Call Savings 12-Month Stock in Immovable Market
Treasury Treasury Treasury Money Deposits Fixed Trade Property Rate of
Bill Bill Bill Rate Deposits Interest(e)
1970 - - 12.00 4.76 - - - 4.50 4.50-4.75 8.50-12.00 8.00-11.00 6.50 -
1971 - - 12.00 5.00 - - - 4.50 4.50-4.75 8.50-12.00 8.00-11.00 6.50 -
1972 - - 12.00 5.00 - - - 4.50 4.50-4.75 8.50-12.00 8.00-11.00 6.50 -
1973 - - 12.00 5.00 - - - 4.50 4.50-4.75 8.50-12.00 8.00-11.00 6.50 -
1974 - - 12.00 5.00 - - - 4.50 4.50-4.75 8.50-12.50 8.00-12.00 6.50 -
1975 - - 12.00 5.00 - - - 5.50 7.00-7.50 8.50-13.00 8.50-12.00 6.50 -
1976 - - 12.00 5.00 - - - 5.50 7.00-7.50 8.50-14.00 8.50-14.00 6.50 -
1977 - - 12.00 9.00 - - - 7.20 14.00-15.00 13.00-19.00 13.00-19.00 10.00 -
1978 - - 12.00 9.00 - - - 7.20 14.00-15.00 13.00-19.00 13.00-19.00 10.00 -
1979 - - 12.00 9.00 - - - 5.00-9.00 14.00-15.00 13.00-20.00 13.00-19.00 10.00 -
1980 - - 12.00 13.00 - - - 10.00-14.00 20.00 15.00-28.00 13.00-28.00 12.00 12.00
1981 - - 14.00 13.00 - - - 10.00-14.00 20.00-22.00 15.00-28.00 13.00-28.00 14.00 12.00
1982 - - 14.00 13.00 - - - 10.00-14.50 15.00-22.00 16.00-30.00 16.00-30.00 14.00 12.00
1983 - - 16.00 12.00 - - - 10.00-15.00 16.00-25.00 13.00-30.00 18.00-28.00 13.00 12.00
1984 - - 16.00 14.00 - - - 10.00-15.00 14.00-22.00 13.00-30.00 16.00-30.00 13.00 12.00
1985 - - 18.00 11.50 - - - 10.00-13.50 12.00-18.00 13.00-28.00 11.00-30.00 11.00 12.00
1986 - - 18.00 11.31 - - - 6.00-12.00 8.50-14.00 12.00-30.00 12.00-30.00 11.00 12.00
1987 - - 10.00 10.77 - - - 6.00-11.00 8.50-14.00 14.00-30.00 12.00-30.00 10.00 12.00
1988 - - 15.00 18.86 - - - 5.00-11.00 9.00-15.50 10.00-28.00 9.00-26.00 10.00 12.00
1989 - - 15.00 18.10 18.20 19.10 - 5.00-14.00 11.00-20.50 9.80-30.00 9.80-28.00 14.00 12.00
1990 - - 15.00 17.41 18.02 18.36 - 5.00-14.00 11.00-21.00 10.00-30.00 9.00-28.00 15.00 18.00
1991 - - 13.00 16.33 16.38 17.43 - 6.50-14.00 10.00-20.00 9.80-30.00 9.80-28.00 17.00 18.00
1992 - - 13.00 17.67 18.05 18.99 - 6.50-14.00 13.50-20.00 10.00-30.00 9.00-30.00 17.00 18.00
1993 16.50 - 15.00 18.09 18.47 19.38 - 5.50-14.00 13.50-17.50 16.50-30.00 16.50-28.00 17.00 18.00
1994 20.00 - 15.00 18.73 19.29 19.43 - 5.50-13.00 10.00-17.00 15.00-30.00 16.50-28.00 17.00 18.00
1995 16.50 - 15.00 19.26 18.91 18.97 - 5.00-13.00 10.00-17.00 17.00-30.00 17.00-28.00 17.00 18.00
1996 12.75 - 15.00 17.45 17.40 17.38 - 4.50-13.00 12.00-17.75 15.00-30.00 15.00-28.00 17.00 18.00
1997 11.00 12.85 12.00 9.97 10.09 10.21 - 3.00-11.00 8.50-15.25 14.00-28.00 14.00-29.00 17.00 12.70
1998 11.25 15.00 12.00 12.01 12.34 12.59 - 2.00-10.00 9.00-13.00 7.70-30.00 7.50-33.00 17.00 11.50
1999 9.25 13.48 11.00 11.79 12.29 12.77 - 2.00-10.00 9.00-12.50 12.00-28.00 13.00-29.00 16.00 9.70
2000 17.00 20.00 11.00 17.77 17.90 18.22 - 2.00-11.00 9.00-15.00 14.00-28.50 10.00-29.00 25.00 9.10
2001 12.00 14.00 10.00 12.92 13.27 13.74 12.65 4.00-12.00 9.50-14.50 12.00-26.50 12.00-30.00 18.00 9.21
2002 9.75 11.75 10.00 9.92 9.89 9.91 10.39 3.50-11.00 7.50-11.00 12.00-25.00 10.00-29.00 18.00 11.11
2003 7.00 8.50 10.00 7.35 7.30 7.24 7.59 2.10-7.25 5.00-7.75 7.00-23.00 7.00-29.00 15.00 9.58
2004 7.50 9.00 10.00 7.25 7.65 7.65 9.73 3.00-7.75 5.50-9.75 9.00-23.00 8.00-22.00 15.00 6.30
2005 8.75 10.25 10.00 10.10 10.32 10.37 10.73 3.00-10.25 5.50-11.50 9.00-23.00 10.00-22.50 15.00 5.16
2006 10.00 11.50 10.00 12.76 12.78 12.96 14.47 3.00-10.50 5.50-14.00 8.36-27.00 7.86-27.00 15.00 5.70
2007 10.50 12.00 10.00 21.30 19.99 19.96 24.99 3.00-16.50 8.50-20.00 10.00-30.00 10.00-30.00 15.00 6.86
2008 10.50 12.00 7.75 17.33 18.57 19.12 14.66 3.00-16.50 8.50-20.25 10.00-30.00 10.00-30.00 15.00 9.16
2009 7.50 9.75 7.00 7.73 8.73 9.33 9.07 1.50-10.50 7.25-19.00 9.50-30.00 9.15-30.00 15.00 11.32
2010 7.25 9.00 7.00 7.24 7.35 7.55 8.03 1.50-9.50 5.05-17.00 8.20-25.00 8.00-28.00 15.00 11.33
2011 7.00 8.50 8.00 8.68 8.71 9.31 8.97 1.00-8.50 5.55-11.00 5.15-24.00 4.50-26.00 15.00 7.26
2012 7.50 9.50 8.00 10.00 11.32 11.69 9.83 0.75-10.50 5.00-17.00 9.50-25.00 4.50-26.00 15.00 6.48
2013 6.50 8.50 6.00 7.54 7.85 8.29 7.66 0.75-9.14 6.00-16.00 8.50-23.00 5.00-26.00 15.00 8.59
2014 6.50 8.00 6.00 5.74 5.84 6.01 6.21 0.50-8.00 3.95-12.00 5.90-24.00 4.75-24.00 15.00 10.34
2015 6.00 7.50 6.00 6.45 6.83 7.30 6.40 0.50-8.00 3.95-15.00 6.00-24.00 4.74-24.00 15.00 7.76
2016 7.00 8.50 7.50 8.72 9.63 10.17 8.42 0.50-9.00 4.50-15.00 3.00-24.00 1.50-24.00 15.00 5.98
2017 7.25 8.75 7.50 7.69 8.30 8.90 8.15 0.50-9.50 4.89-15.00 5.25-28.00 4.00-30.00 15.00 7.06
2018 8.00 9.00 6.00 10.01 9.99 11.20 8.95 0.50-8.50 4.53-15.00 7.93-28.00 4.00-28.00 15.00 9.08
2019 7.00 8.00 5.00 7.51 8.02 8.45 7.45 0.20-7.50 3.55-15.00 4.47-28.00 4.00-28.00 15.00 11.50
2020 4.50 5.50 2.00 4.69 4.80 5.05 4.55 0.10-7.00 0.25-15.00 3.95-28.00 4.00-28.00 8.50 11.64
2021 5.00 6.00 4.00 8.16 8.33 8.24 5.95 0.05-6.35 0.15-15.00 4.00-28.00 3.02-28.00 9.00 10.12
2022 14.50 15.50 4.00 32.64 32.20 29.27 15.50 0.25-6.00 4.50-30.00 5.66-42.48 2.81-39.00 30.22 7.48
2023 9.00 10.00 2.00 14.51 14.16 12.93 9.24 0.25-13.00 1.00-22.00 5.66-28.00 1.00-34.97 14.50 16.97
(a) Renamed w.e.f. 02 January 2014 as the Standing Deposit Facility Rate (SDFR). Previously named as the Repo Rate. Source: Central Bank of Sri Lanka
(b) Renamed w.e.f. 02 January 2014 as the Standing Lending Facility Rate (SLFR). Previously named as the Reverse Repo Rate.
(c) The Statutory Reserve Ratio (SRR) is the proportion of rupee deposit liabilities that licensed commercial banks are required to maintain as a deposit with the Central
Bank, subject to an allowance for till cash balances. Prior to 2001, SRR applicable on rupee demand deposits is reported since different SRRs were applicable on
different types of deposits, including foreign currency deposits.
(d) The rate at which the Central Bank grants advances to banking institutions as the lender of last resort. Up to April 2020, the Bank Rate was a fixed rate
determined by the Monetary Board. Since 16 April 2020, the Bank Rate was allowed to be determined automatically with a margin of 300 basis points
above SLFR. Since 03 November 2022, the Bank Rate was commensurately adjusted in line with the latest available Average Weighted New Deposit Rate (AWNDR)
with a margin of +700 basis points. Since 02 January 2023, the Bank Rate was commensurately adjusted in line with the latest available AWNDR with a margin
of +300 basis points, rounded off to the nearest multiple of half a percentage point. Since 01 March 2023, the Bank Rate was delisted from monetary policy
instruments and considered as a policy instrument that the Central Bank uses as the lender of last resort (LOLR) to support the stability of the banking and financial
system.
(e) The Legal Rate is defined under the Civil Procedure Code (Amendment) Act No. 6 of 1990 and is applicable to any legal action for the recovery of a sum of money.
The Market Rate is defined under the Debt Recovery (Special Provisions) Act No. 2 of 1990 and is applicable only in relation to legal actions instituted by lending
institutions for the recovery of debt exceeding Rs. 150,000 arising out of commercial transactions, where there is no agreed rate of interest. The Governing Board
of the Central Bank determines the Legal Rate and Market Rate for each year and publishes in the Government Gazette in the month of December to be applicable
for the forthcoming year. The Legal Rate and the Market Rate for the year 2024 is 15.15 per cent per annum.
 ONLINE VERSION OF STATISTICAL APPENDIX

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annual-economic-review-2023/statistical-appendix

Table

1. REAL SECTOR
Gross National Income by Industrial Origin at Current Market Prices .... .... 1
Gross National Income by Industrial Origin at Constant (2015) Prices .... .... 2
Gross Value Added by Institutional Sector at Current Market Prices .... .... 3
Provincial Gross Domestic Product by Industrial Origin at Current Market Prices.... .... 4
Resources and their Utilisation at Current Market Prices .... .... .... 5
Resources and their Utilisation at Constant (2015) Prices .... .... .... 6
Reconciliation of Key Aggregates at Current Market Prices .... .... .... 7
Gross Domestic Capital Formation at Current Market Prices . .... .... 8
Composition of Private Consumption Expenditure at Current Market Prices .... .... 9
Income Components of Gross Domestic Product at Current Market Prices .... .... 10
Income Components of Gross Domestic Product at Constant (2015) Prices .... .... 11
Trends in Principal Agricultural Crops .... .... .... 12
Production of Tea, Rubber, Coconut and Other Export Agriculture Crops .... .... 13
Annual Rainfall and Rainy Days .... .... .... 14
District-wise Performance of the Paddy Sector .... .... .... 15
Paddy Production .... .... .... 16
Performance of Other Field Crops .... .... .... 17
Land Cultivated under the Mahaweli Development Programme .... .... 18
Sugar Sector Statistics .... .... .... 19
Forestry Sector Statistics .... .... .... 20
Livestock and Fisheries Sector Statistics .... .... .... 21
Investment Approvals in Industry by the Board of Investment (BOI) of Sri Lanka .... .... 22
Realised Investments in the BOI Enterprises .... .... .... 23
Foreign Direct Investment of BOI Enterprises by Sector .... .... .... 24
Capacity Utilisation in Factory Industry .... .... .... 25
Employment in Selected State Owned Industrial Enterprises..... .... .... 26
Performance of Selected State Owned Industrial Enterprises... .... .... 27
Regional Distribution of Industrial Enterprises .... .... .... 28
Major Divisions of Index of Industrial Production (IIP) .... .... .... 29
Index of Industrial Production (IIP) .... .... .... 30
 Table
Demography .... .... .... 31
Labour Force Participation Rate .... .... .... 32
Employment by Economic Activity .... .... .... 33
Labour Force Trends .... .... .... 34
Public Sector Employment .... .... .... 35
Employees’ Provident Fund .... .... .... 36
Employees’ Trust Fund .... .... .... 37
Strikes in Private Sector Industries .... .... .... 38
Performance of Telecommunications and Postal Services .... .... .... 39
Performance of the Power Sector .... .... .... 40
Performance of the Petroleum Sector .... .... .... 41
Salient Features of the Transport Sector .... .... .... 42
Performance of the Port Services .... .... .... 43
Salient Features of Government Health Services .... .... .... 44
Salient Features of Education Sector .... .... .... 45
Movement of the Colombo Consumer Price Index (2021=100) .... .... 46
Movement of the National Consumer Price Index (2021=100) .... .... 47
Colombo Consumer Price Index (CCPI) (2021=100) .... .... .... 48
National Consumer Price Index (NCPI) (2021=100) .... .... .... 49
Producer Price Index (2018 Q4 =100) .... .... .... 50
Average Retail Prices of Selected Food Items by Province 2019-2023 .... .... 51
Producer Prices of Selected Commodities .... .... .... 52
Wage Rate Indices (Public Sector Employees) (2016=100) .... .... 53
Minimum Wage Rate Indices (Formal Private Sector Employees) (December 1978=100) .... 54
Wage Rate Indices (Informal Private Sector Employees) (2018=100) .... .... 55
Average Daily Wages of the Informal Private Sector .... .... .... 56
Average Daily Wages of Informal Private Sector by Province 2022 – 2023 .... .... 57

2. EXTERNAL SECTOR

Central Bank Trade Indices - Value - Exports .... .... .... 58

Central Bank Trade Indices - Value - Imports .... .... .... 59
Central Bank Trade Indices - Volume - Exports .... .... .... 60
Central Bank Trade Indices - Volume - Imports .... .... .... 61
Central Bank Trade Indices - Unit Value - Exports .... .... .... 62
Central Bank Trade Indices - Unit Value - Imports .... .... .... 63
Foreign Trade .... .... .... 64
 Table
Composition of Exports .... .... .... 65
Export Performance according to the Standard International Trade Classification (SITC) .... 66
Composition of Exports according to the SITC .... .... .... 67
Tea Exports, Sales and Prices .... .... .... 68
Volume and Value of Tea Exports .... .... .... 69
Country Classification of Tea Exports .... .... .... 70
Rubber Exports and Prices .... .... .... 71
Major Rubber Export Destinations .... .... .... 72
Country Classification of Garment Exports .... .... .... 73
Export Volumes, Values and Prices of Major Coconut Products .... .... 74
Export Volumes and Values of Other Agricultural Products .... .... .... 75
Selected Industrial and Mineral Exports .... .... .... 76
Composition of Imports .... .... .... 77
Imports by Major Categories .... .... .... 78
Import Performance based on Standard International Trade Classification (SITC) .... 79
Composition of Imports according to the SITC .... .... .... 80
Exports and Imports of Major Commodities .... .... .... 81
Direction of Trade - Exports .... .... .... 82
Direction of Trade - Imports .... .... .... 83
Performance in the Tourism Sector .... .... .... 84
Some Indicators of the Regional Distribution of Tourism .... .... .... 85
Current and Capital Account .... .... .... 86
Financial Account .... .... .... 87
International Investment Position .... .... .... 88
Outstanding External Debt .... .... .... 89
External Debt Service Payments .... .... .... 90
Workers’ Remittances .... .... .... 91
Foreign Direct Investments (FDI) Inflows - Country-wise Breakdown .... .... 92
End of Period Exchange Rates .... .... .... 93
Average Exchange Rates .... .... .... 94
Monthly Indices of Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) 95
Interbank Market Transactions .... .... .... 96
Absorption and Supply of Foreign Exchange by the Central Bank .... .... 97

3. FISCAL SECTOR

Economic Classification of Government Fiscal Operations .... .... .... 98

Economic Classification of Government Revenue .... .... .... 99
Economic Classification of Government Expenditure and Lending Minus Repayments .... 100
 Table
Functional Classification of Government Expenditure and Lending .... .... 101
Voted Expenditure of the Government of Sri Lanka - 2023 .... .... .... 102
Voted Expenditure of the Government of Sri Lanka - 2024 .... .... .... 103
Current Transfers to Public Corporations and Institutions .... .... .... 104
Capital Transfers to Public Corporations and Institutions .... .... .... 105
Composition of Outstanding Central Government Debt (as at end year) .... .... 106
Ownership of Central Government Debt (as at end year) .... .... .... 107
Ownership of Treasury Bills (as at end year) .... .... .... 108
Ownership of Treasury Bonds (as at end year) .... .... .... 109
Ownership of Rupee Loans .... .... .... 110
Ownership of Outstanding Foreign Debt .... .... .... 111
Net Receipts of Foreign Assistance .... .... .... 112
Outstanding Public Debt (as at end year) .... .... .... 113
Central Government Debt Service Payments .... .... .... 114
Central Government Debt Indicators .... .... .... 115
Budget Outturn for Provincial Councils .... .... .... 116
Consolidated Budget .... .... .... 117

4. MONETARY AND FINANCIAL SECTOR

Monetary Aggregates - M1 and M2 .... .... .... 118

Monetary Survey - M2 .... .... .... 119
Consolidated Monetary Survey - M2b .... .... .... 120
Financial Survey - M4 .... .... .... 121
Monetary Aggregates - Summary .... .... .... 122
Money Rates: The Central Bank and Commercial Banks .... .... .... 123
Commercial Banks’ Loans and Advances by Type of Security (End of Period) .... .... 124
Commercial Banks’ Loans and Advances to the Private Sector .... .... 125
Assets and Liabilities of the Central Bank .... .... .... 126
Assets and Liabilities of Domestic Banking Units (DBUs) of Commercial Banks .... .... 127
Assets and Liabilities of Offshore Banking Units (OBUs) of Commercial Banks .... .... 128
Financial Soundness Indicators - Banking Industry .... .... .... 129
Financial Soundness Indicators - Licensed Commercial Banks (LCBs) .... .... 130
Financial Soundness Indicators - Licensed Specialised Banks (LSBs) .... .... 131
Assets and Liabilities of Licensed Finance Companies .... .... .... 132
Information on Licensed Finance Companies .... .... .... 133
Savings and Fixed Deposits of Deposit Taking Institutions .... .... .... 134
Information on Insurance Companies .... .... .... 135
 Table
Money Market Transactions ..... ..... .... ..... .... 136
Share Market Performance ..... ..... .... ..... .... 137
Total Cultivation Loans Granted by the Lending Banks (Position as at 31 December 2023) ..... .... 138
New Comprehensive Rural Credit Scheme Loans Granted for Subsidiary Food Crops by the
Lending Banks (Position as at 31 December 2023) ..... ..... .... ..... .... 139
Operations of the Crop Insurance Programme - Paddy Sector
(Position as at 31 December 2023) ..... ..... .... ..... .... 140
Deposits and Advances of District Co-operative Rural Banks (2013 - 2023)
and District-wise Classification for 2021 ..... ..... .... ..... .... 141
Deposits and Advances of District Co-operative Rural Banks’ Unions (2015 - 2023)
and District-wise Classification for 2021 ..... ..... .... ..... .... 142

ONLINE VERSION OF SPECIAL STATISTICAL APPENDIX

Scan the QR code or follow the below path/link to access the online version of
the Special Statistical Appendix
Path - Main Menu  Publications  Economic and Financial Reports  Annual Economic Review  Annual
Economic Review 2023  Special Statistical Appendix
Link - https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-economic-review/
annual-economic-review-2023/special-statistical-appendix

Table

1 REAL SECTOR

Population and Labour Force .... .... .... 1

National Output .... .... .... 2
Prices .... .... .... 3

2 EXTERNAL SECTOR

Balance of Payments .... .... .... 4

Reserves, Total Foreign Assets, External Debt and Exchange Rates .... .... 5

3 FISCAL SECTOR

Government Fiscal Operations .... .... .... 6

Central Government Debt .... .... .... 7

4 MONETARY SECTOR

Monetary Survey (M2b) .... .... .... 8

Interest Rates .... .... .... 9