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he Sri Lankan economy grew by 8 per cent in the rst hal o 2011. Improved macroeconomic environment, increased capacity utilisation together with expansion o economic actiity in the Nort hern and Eastern provinces and enhanced external demand underpinned the high growt h momentum. Inatio n remained at around mi d-single digit leel, largely reecting improved domestic supply conditions. Monetary policy continued to be largely accommodatie. Fiscal perormance was broadly in line with budgetary targets. Te public investment programme o the government progressed with accelerat ed implementati on o major inast ructure deelopment projects. Te external sector urther strengthened during the rst hal o 2011 beneting om aour able macroeconomic deelopments, strong external demand and improved investor condence. Despite healthy growth in exports, the trade decit widened as imports grew aster . Howeer , improved oreign inows through priate remittances and increased surplus in the serices account helped contain the current account decit. Inows to the capital and nancial account exceeded the current account decit resulting a surplus o US dollars 944 million in the Balance o P ayments (BOP), by end August 2011. Accordingly, the external gross ofcial reseres o the country reached a historically high leel o US dollars 8.1 billion by end August 2011 and the rupee/US do llar exchange rate remaine d largely stab le. 1 Overview

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