CBSL kept key interest rates unchanged
The annual average inflation declined to 3.1 per cent by January 2010, although inflation, as measured by the year-on-year increase in the Colombo Consumers’ Price Index (base=2002) increased to 6.5 per cent in January 2010 from 4.8 per cent at end 2009. The gradual increase in year-on-year inflation mainly reflects the dissipation of the base effect as well the recovery in commodity prices globally.
The Central Bank has already relaxed its monetary policy stance in the course of the year 2009 in order to support economic activity. This was made possible by the deceleration in inflation and the favourable outlook for inflation that prevailed. In response, market interest rates are adjusting downwards. Credit obtained by the private sector, which was negatively impacted by the slowdown in economic activity domestically as well as globally has been increasing in nominal terms towards the end of the year 2009.
Considering these developments, the Monetary Board, at its meeting held on 15 February 2010, decided that its current monetary policy stance will be maintained to facilitate the recovery in domestic economic activity, which is underway. The Monetary Board will continue to monitor economic developments and prospects, with a view to reviewing its policy stance.
Sri Lanka gets ADB, Japan help to improve electricity services
Feb 17, 2010 (LBO) – The Asian Development Bank (ADB) and Japan will provide support to Sri Lanka to improve its power transmission system and expand rural electrification, an ADB statement said.
This will contribute toward the Sri Lankan government’s goal of widening public access to electricity services from 80 percent to 98 percent by 2016.
“Power sector development will be critical to Sri Lanka’s post war development,” said Richard Vokes, Country Director of ADB’s Sri Lanka Resident Mission.
“We hope this project will lend strong support to the government in addressing a number of urgent priorities in the power sector, particularly improvements in energy efficiency, reliability and access to meet the country’s rapidly growing demands.”
The island’s 30-year ethnic war in the north and east ended last May, resulting in an economic revival.
The ADB said the Sustainable Power Sector Support technical assistance project is funded by the government of Japan through the Japan Special Fund (JSF) that is administered by ADB.
The JSF is granting 800,000 US dollars for the project while the government of Sri Lanka will provide 200,000 dollars in kind contribution.
Katsuho Hayashi, Second Secretary of the Japanese Embassy in Colombo, said the project is expected to contribute to further economic growth through sustainable power sector development.
It is also expected to reduce poverty by improving access to electricity in rural areas, and enhance energy efficiency and renewable energy development, which will contribute to environmental sustainability, he said.
“The technical assistance will use low-cost design and comprehensive feasibility studies for strengthening transmission system in the Southern, Eastern, and Northern parts of the country,” said Mukhtor Khamudkhanov, Senior Energy Specialist of ADB’s South Asia Department.
“It will also address rural electrification improvements including in the Eastern province.”
The trade deficit contracted for the 12th consecutive month in December 2009
Both, exports and imports reported positive growth in December 2009, on a year-on-year basis. Export earnings grew by 6.4 per cent in December 2009 to US dollars 723 million fuelled by the agricultural exports, which grew by 40.2 per cent led by the high prices garnered by tea and rubber in the international commodity markets. Expenditure on imports grew marginally by 0.5 per cent in December 2009 to US dollars
1,054 million. Imports of intermediate goods and consumer goods were the key drivers of this growth.
Cumulatively, however, year-on-year earnings from exports and expenditure on imports declined by 12.7 per cent and 29.4 per cent, respectively, in 2009. The trade deficit contracted for the 12th consecutive month in December 2009 by 10.4 per cent to US dollars 330 million. Accordingly, the cumulative trade deficit decreased by 52.5 per cent to US dollars 2,798.6 million in 2009 from US dollars 5,897.4 million in the corresponding period of 2008.
The deficit in the trade account was off-set by the higher inflows of workers’ remittances. During 2009 workers’ remittances increased by 14.1 per cent to US dollars 3,330.3 million. As a result, workers’ remittances were US dollars 532 million (about 19 per cent) in excess of the trade deficit.
The gross official reserves, with and without Asian Clearing Union (ACU) funds, were at US dollars 5,357 million and US dollars 5,097 million, respectively, by end December 2009. This includes short-term net inflows to the Government Treasury bills of US dollars 277 million and
Treasury bonds of US dollars 1,068 million. Based on the previous 12 months average imports (US dollars 823 million per month), the gross official reserves, without ACU funds, were equivalent to 6.2 months of imports.