Economic & Market Bulletin
[May 16, 2005]

A weekly publication of the Economic Affairs Division of the Ministry of Foreign Affairs
Volume 2:Issue 9
13^th May 2005

Monetary Policy Review – May 2005

The Monetary Board has reviewed the recent economic developments and projections and has decided to continue open market operations more aggressively and to increase the Repurchase (Repo) rate and the Reverse Repurchase (Reverse Repo) rate by 25 basis points to 7.75 per cent and 9.25 per cent, respectively, from 13 May 2005.
The growth momentum in the economy is continuing. The recovery in the sectors that were affected by the tsunami disaster, particularly tourism and fisheries, is progressing. Paddy production has shown a significant improvement during the Maha season 2004/05, while tea production also increased during the first three months of the year. The industrial sector has benefited from the improved performance in apparel, processed food, cement, building materials, rubber based products and basic metal products.
External trade expanded with export earnings increasing at a higher rate than the increase in expenditure on imports. External reserves improved with the increased foreign currency inflows to the government and the private sector including non-government organisations.

Japanese aid team studies local reforms

A 8 –member Japanese Official Development Assistance (ODA) delegation met with government officials recently and conducted a preliminary round of policy oriented discussions.

They exchanged views on ongoing reforms and policy issues including the power sector and water issues.

One of the major issues discussed at the meeting was the loan of US $ 60 million that the Japan Bank for International Corporation (JBIC) had provided to the government for Ceylon Electricity Board (CEB) reforms.

The Asian Development Bank (ADB) will allocate US dollars 65 million to assist in the restructuring of People’s Bank. The amount would be given to the Bank as a loan with in a period of three years.

It is understood that the first instalment of US 20 million was released to Sri Lanka last December and the Bank would receive this money next month from the Treasury and also the ADB would provide 20 million US dollars annually for two more years.

The other 5 million US dollars would be to provide technical, human resource and logistical assistance to the People’s Bank.

The Government is ready with its commitment to launch a special credit guarantee scheme to boost the Small and Medium Enterprises (SMEs) in the crucial apparel sector.

In the Budget 2005, the government said that Rs600 million would be earmarked for the issuance of guarantee for SME s in the apparel sector for improvement in infrastructure and technology.

The maximum loan under the scheme is Rs8 million and terms such as interest rates and repayment period would be on a case-by-case basis on the strength of the project and credit profile of the borrower.

NSB records Rs4.1 billion pre- tax profits

The National Saving Bank (NSB) recorded a pre-tax profit of Rs 4117 million in 2004. This is a decline by 0.7% when compared to the pre tax profit of Rs4146 million in 2003.

The Bank has recorded after tax profit of Rs..3114 million in 2004, compared to the corresponding figure of Rs3533 million in 2003.

NSB was able to mobilise Rs18, 994 million in 2004 as against the target mobilisation of Rs19,000 million. The loans and investments portfolio reflected a growth of 11.8 % to the stand at Rs189 billion at the end of last year.

The total contribution made to the Government by way of taxes and levies amounted to Rs3.2 billion during the year.

The Port of Colombo is scheduled to be the first Port in the Indian sub continent region to comply with the United States customs security initiatives (US – CSI). The latest available information reveals that the Sri Lanka customs is in the process of receiving an X-Ray unit from the United States customs on a loan basis for the purpose of implementation of the CSI.

Currently the Sri Lanka Customs are at the stage of entering into an MOU with the US Customs to receive this equipment. It is expected that the X-ray equipment will be in place by September, 2005.

The Port of Colombo has taken another major step forward by being the first Port in the Indian sub continent region to take part in the Mega Port initiative of the National Nuclear Security Administration of the United States Government.

The Ministry of Finance and the Asian Development Bank last week signed agreements providing a series of grants and loans to Sri Lanka as tsunami aid.

Grants include a US$ 150 million from the ADB’s Asian Tsunami Grant fund, a loan of SDR 4,553,000 (approximately US$ 7 million) from the Bank’s Special Fund Resources for the implementation of the Tsunami Affected Areas Rebuilding Project (TAARP), a grant of US$ 14 million and a loan of SDR 16,913,000 or US$ 26 million for the North East Community Restoration and Development Project 11(NECORD11).

A Guide to Foreign Exchange Transactions

The Central Bank of Sri Lanka has published a booklet titled “A Guide to Foreign Exchange Transactions”. This booklet provides information on the existing rules and procedures applicable to foreign exchange transactions under the Exchange Control Act, in a concise and easily understandable manner. It also provides details of liberalized foreign exchange transactions, along with special facilities granted to maintain foreign currency accounts, etc.

This comprehensive and practical Guide has been compiled to cater to the needs of the general public and will be an useful reference for all those engaging in foreign exchange transactions, particularly Authorised Dealers in foreign exchange, financial institutions, local and foreign companies, residents, non-resident Sri Lankans and foreign investors.

The “Guide to Foreign Exchange Transactions” can be downloaded from the Central Bank website : www.centralbanklanka.org

The National Saving Bank (NSB) recorded a pre-tax profit of Rs 4117 million in 2004. This is a decline by 0.7% when compared to the pre tax profit of Rs4146 million in 2003.

The Bank has recorded after tax profit of Rs.3114 million in 2004, compared to the corresponding figure of Rs.3533 million in 2003.

NSB was able to mobilise Rs.18, 994 million in 2004 as against the target mobilisation of Rs19,000 million.

The total contribution made to the Government by way of taxes and levies amounted to Rs3.2 billion during the year.

Contact Information: Send mail to gosl@presidentsl.org with questions or comments about this web site.
Last Updated Date: May 16, 2005 .

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