Saturday, 30 May 2020 12:41

The worst yet to come for Sri Lanka’s slowing economy

Sri Lanka’s capital outflows and the depreciation of currency continued since mid February up to now despite Central Bank’s precautionary measures who its weakest quarter ending May

But biggest doip in economic growth amidst Covid-19 is yet to come, official sources said.

As of May 20, there have been net capital outflows of around US$460 million (0.5 percent of GDP) since mid February, mostly from the domestic treasury securities market.

The Sri Lankan currency has also depreciated by around 3.1 percent against the US dollar since that time.

The Sri Lankan authorities have introduced measures for a period of three months, aimed at restricting capital outflows, through suspension of outward investment payments, and a prohibition on commercial banks purchasing Sri Lankan sovereign bonds.

There are also some current account restrictions, suspending imports of non-essential goods except raw materials, pharmaceutical products and fuel.

Commercial banks have been prohibited of facilitating imports of vehicles and non-essential goods, and suspension of outward remittances. Inward remittances will be exempted from certain regulations and taxes..

The reserve money decreased to Rs 988.46 billion during the week ending My 29 compared to the previous week’s figure of Rs. 995,83 billion mainly due to the decrease in currency in circulation and deposits held by the commercial banks with the Central Bank.

The total outstanding market liquidity was a surplus of Rs. 45.270 bn by end of this week, compared to a surplus of Rs. 40.930 bn by the end of last week.

During the year up to 29th May 2020 the Sri Lanka rupee depreciated against the US dollar (2.5 per cent).

 

(LIN)

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