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Recommendations made by the Advisory Committee for Revival of Failed Licensed Finance Companies

The Monetary Board of the Central Bank of Sri Lanka (Monetary Board) established the Advisory Committee for Revival of Failed Finance Companies (Committee) in October 2021 to examine possible revival options for five (5) failed finance companies, i.e., Central Investments & Finance Ltd., ETI Finance Ltd., TKS Finance Ltd., The Finance Company PLC and The Standard Credit Finance Ltd, of which licenses have been either cancelled or suspended. The Monetary Board has vested the Committee with the responsibility of recommending possible revival options or recommending liquidation for aforementioned five failed finance companies if such revival options do not seem feasible.

The Committee submitted its final report to the Monetary Board on 31.05.2022, after careful consideration of several proposals submitted by different parties for revival of four (4) of the above-mentioned companies.

Amending Limits and Terms and Conditions on Possession of Foreign Currency

With the intention of attracting foreign currency in the hands of the public into the formal banking system, the Minister of Finance has issued an Order under Section 8 of the Foreign Exchange Act No. 12 of 2017 as follows: 

  1. Reducing the amount of foreign currency retained in possession by a person in, or resident in, Sri Lanka from USD 15,000 to USD 10,000 or its equivalent in other foreign currencies.
  2. Granting an amnesty period of 14 working days effective from the date of the Order (16 June 2022) for persons in, or resident in, Sri Lanka who hold foreign currency notes in possession for the following:

i.To deposit into a Personal Foreign Currency Account or into a Business Foreign Currency Account as specified in the Order, or

The Central Bank of Sri Lanka Launches the International Transactions Reporting System

Recognising the need to implement a comprehensive cross border transactions and domestic foreign currency transactions monitoring system as a key national priority, the Central Bank of Sri Lanka (CBSL) has implemented a new data collecting system known as the International Transactions Reporting System (ITRS) with the participation of Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs). The ITRS is a comprehensive data gathering system on cross border transactions and domestic foreign currency transactions and is aimed at filling multitude of existing data gaps. It will help policy formulation in many aspects by providing valuable inputs for both statistical and regulatory purposes. The ITRS system will serve a number of purposes, including the enhancement of Balance of Payments Statistics, including export proceeds, imports, services account transactions such as IT/BPO transactions, workers’ remittances, financial account transactions, and many other statistical data inputs.

NCPI based headline inflation accelerated further on year-on-year basis in May 2022

Headline inflation, as measured by the year-on-year (Y-o-Y) change in the National Consumer Price Index (NCPI, 2013=100) increased to 45.3% in May 2022 from 33.8% in April 2022. This increase in Y-o-Y inflation was driven by the monthly increases of both Food and Non-Food categories. Accordingly, Food inflation (Y-o-Y) increased to 58.0% in May 2022 from 45.1% in April 2022, while Non-Food inflation (Y-o-Y) increased to 34.2% in May 2022 from 23.9% in April 2022.

Sri Lanka Purchasing Managers’ Index - May 2022

Purchasing Managers' Indices for both Manufacturing and Services activities indicated a subdued performance in May 2022.

Manufacturing PMI recorded an index value of 50.3 in May 2022, with an increase of 13.9 index points from the seasonally low value in the month of April.

Services PMI dropped marginally to an index value of 42.4 in May 2022 indicating a contraction in services activities for the second consecutive month.

External Sector Performance - April 2022

Import expenditure declined, year-on-year, for the second consecutive month, while earnings from exports increased in April 2022. This reduction in imports has gathered pace in May 2022, as per the provisional data from Customs. As a result, the trade deficit recorded a notable year-on-year contraction. Meanwhile, tourist arrivals and workers’ remittances showed a moderate performance in April 2022, compared to the previous month. However, workers’ remittances rebounded in May 2022 supporting the stability of the external current account. Foreign investment in the government securities market and Colombo Stock Exchange (CSE) recorded marginal net inflows during April 2022. Considering continued pressures in the domestic foreign exchange market, the Central Bank introduced measures in May 2022, including the restrictions on open accounts and consignment payments terms that have helped curtail activity in the informal market and narrow the gap between the official and grey market exchange rates. Further, the Central Bank commenced providing daily guidance on the degree of volatility (with an allowable two-sided variation margin) to all licensed commercial banks from 13 May 2022 based on exchange rate determined in the interbank market on the preceding day. The implementation of these measures has brought in a greater stability in the exchange rate determination thus far. 

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