Economic

There are also import restrictions of certain goods, as well as prohibiting commercial banks facilitating imports of vehicles.

Outward remittances have been limited, while inward remittances will be exempted from certain regulations and taxes.

A scheme has also been introduced to insure investors against foreign exchange risk, by allowing domestic currency proceeds from qualified investments in treasury bonds to be converted at the same exchange rate as prevailed at the time of initial investment.

Commercial banks are prohibited from purchasing foreign currency denominated Sri Lanka International Sovereign Bonds until end-March 2021, senior CB official said.

A net outflow of foreign investment amounting to USD 10 million was recorded in the rupee denominated 553 million during 2020. The total outstanding exposure of foreign investment in the rupee denominated government securities market remained low at USD 37 million by the end of December, 2020.

There were net outflows of USD 16 million from the secondary market of the CSE in December 2020. On a cumulative basis, the CSE recorded a net outflow of USD 225 million, from both primary and secondary markets, during 2020.

Meanwhile, long term loans to the Government recorded a net outflow of USD 9 million in December 2020.

Gross inflows to the Government amounted to USD 2,002 million in 2020 compared to USD 6,570 million in 2019.

Gross official reserves at end December 2020 amounted to USD 5.7 billion. This level was equivalent to 4.2 months of imports.

Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to USD 8.5 billion at end December 2020, providing an import cover of 6.4 months.

Sri Lanka’s industrial sector is set to drive the country’s economy this year (2021) with real GDP growth is expected to gain 4.8 percent due to more favorable base effects from the earlier forecast of 4.2 percent, Fitch ratings agency claimed.

The Vote on Account, passed in October last year, allows the government only to borrow up to LKR 720 billion during this period. However, Verite Research said that the government has borrowed up to LKR 841 billion between January and April last year.

In terms of the Fiscal Management (Responsibility) Act, No.3 of 2003 as amended by the Fiscal Management (Responsibility) (Amendment) Act, No.15 of 2013, the maximum value of liability as at the end of a particular year shall not exceed 80% of the estimated Gross Domestic Product.

According to financial statements of the government presented to audit, the said restrictions had been complied with.

However, in auditing the financial statements of the year 2019, taking into consideration the liabilities of LKR 1,035 billion as foreign borrowings, treasury bonds and liabilities relating to various public enterprises which had been accounted outside the statement of financial position.

The Central Bank advances and bank overdrafts, the total liability of the Government had been LKR 13,493 billion audit inspection revealed.

It had represented 86.49% of the Gross Domestic Product of the year 2019. As such, the maximum restriction of liabilities cited in the Fiscal Management (Responsibility) Act had been exceeded.

In comparison to the total public debt with the mid year population, the per capita debt was LKR 264,824 as at 31 December 2012 and it had increased up to LKR 558,999 by 31 December 2019.

Moreover, as compared with the per capita debt of LKR 520,364 as at 31 December 2018, it had increased by LKR 38,635 representing 7.42%.

Meanwhile, the per capita debt was LKR 264,824 as at 31 December 2012 and it had increased up to LKR 558,999 by 31 December 2019 in comparison to the total public debt with the mid-year population.

Sri Lanka’s economic growth is likely to ‘strongly rebound’ in 2021 to around 5 to 6 per cent even amidst the Covid-19 pandemic-related disruptions continuing to take a toll on the island nation’s fragile economy, Central Bank Governor Prof. W.D. Lakshman said.