central bank of sri lankadr. indrajit coomaraswamy governor central bank of sri lanka 30,...

CENTRAL BANK OF SRI LANKA

ANNUAL REPORT

OF THE MONETARY BOARD TO THEHON. MINISTER OF FINANCE

FOR THE YEAR

2016

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ISBN 978-955-575-341-8

ISSN 1391-359X

Printed at Sharp Graphic House (Pvt.) Ltd. , No. 47, Old Kottawa Road, Pannipitiya, and published by the Central Bank of Sri Lanka, No. 30, Janadhipathi Mawatha, Colombo 01.

Dr. Indrajit CoomaraswamyGovernor

Central Bank of Sri Lanka30, Janadhipathi Mawatha

Colombo 01, Sri Lanka.

19 April 2017

The Honourable Minister of FinanceMinistry of FinanceThe SecretariatColombo 01.

Dear Sir,

Annual Report of the Monetary Board 2016

In terms of Section 35 of the Monetary Law Act (Chapter 422), within four months after the end of each financial year, the Monetary Board of the Central Bank of Sri Lanka is required to submit an Annual Report to the Honourable Minister of Finance on the condition of the Central Bank and a review of the policies and measures adopted by the Monetary Board during the financial year and an analysis of the economic and financial circumstances which prompted those policies and measures.

The Sixty Seventh Annual Report of the Monetary Board of the Central Bank, in respect of the year 2016, is submitted herewith in fulfilment of this obligation.

Yours faithfully,

CENTRAL BANK OF SRI LANKA

THE MONETARY BOARD

INDRAJIT COOMARASWAMYGovernor

R. H. S. SAMARATUNGASecretary to the Ministry of Finance

MRS. M. RAMANATHANAppointed Member

C. P. R. PERERAAppointed Member

A. N. FONSEKAAppointed Member

PRINCIPAL OFFICERS AS AT 31 DECEMBER 2016Deputy Governors

P. NANDALAL WEERASINGHE

P. SAMARASIRI

S. LANKATHILAKE

Assistant Governors

MRS. J. P. MAMPITIYA

C. J. P. SIRIWARDANA

K. D. RANASINGHE

S. S. RATNAYAKE

S. R. ATTYGALLE (On Release)

H. A. KARUNARATNE(Secretary to the Monetary Board)

MISS. K. SARAVANAMUTTU

R. A. A. JAYALATH

K. M. M. SIRIWARDANA

S. J. A. HANDAGAMA

DEPARTMENTAL HEADSBank Supervision DepartmentA. A. M. THASSIM - DirectorMRS. U. L. MUTHUGALA - Additional DirectorM. R. M. ABEYRATNE - Additional Director

Centre for Banking StudiesU. H. E. SILVA - DirectorD. M. D. B. DISSANAYAKE - Additional Director

Communications DepartmentMISS. S. H. GUNAWARDENA - DirectorT. D. H. KARUNARATHNE - Additional Director

Currency DepartmentJ. P. R. KARUNARATNE - SuperintendentMRS. H. P. T. WIJESURIYA - Additional Superintendent

Department of Supervision of Microfinance Institutions D. A. G. K. WIJETUNGA - DirectorV. BASKARAN - Additional Director

Department of Supervision of Non-Bank Financial Institutions U. P. ALAWATTAGE - DirectorMRS. N. H. E. R. SIRIWARDENA - Additional DirectorR. D. W. PALLEGAMA - Additional DirectorW. RANAWEERA - Additional Director

Domestic Operations DepartmentP. W. D. N. R. RODRIGO - DirectorC. A. ABEYSINGHE - Additional Director

Economic Research DepartmentK. M. M. SIRIWARDANA - DirectorMRS. Y. M. INDRARATNE - Additional DirectorMRS. W. A. DILRUKSHINI - Additional DirectorC. AMARASEKARA - Additional Director

Employees’ Provident Fund Department MRS. K. N. N. M. BANDARA - Superintendent A. G. U. THILAKARATHNA - Additional SuperintendentJ. D. S. J. NANAYAKKARA - Additional Superintendent

Exchange Control DepartmentMRS. T. M. J. Y. P. FERNANDO - Controller of ExchangeB. L. J. S. BALASOORIYA - Additional Controller of ExchangeR. R. JAYARATNE - Additional Controller of Exchange

Facilities Management Department H. B. D. KARUNARATNE - DirectorK. D. R. PIYATILLEKE - Additional Director

Finance Department M. I. SUFIYAN - Chief Accountant

Financial Intelligence UnitH. AMARATHUNGA - DirectorD. K. WIJESURIYA - Additional Director

Human Resources DepartmentK. M. ABEYKOON - Director

Information Technology DepartmentMRS. C. M. D. N. K. SENEVIRATNE - DirectorK. V. K. ALWIS - Additional Director

Internal Audit DepartmentMRS. K. GUNATILAKE - DirectorA. A. CHANDRASENA - Additional Director

International Operations DepartmentC. N. WIJAYASEKERA - DirectorJ. P. GAMALATH - Additional Director

Legal and Compliance DepartmentP. V. L. NANDASIRI - DirectorK. G. P. SIRIKUMARA - Additional Director

Macroprudential Surveillance DepartmentN. W. G. R. D. NANAYAKKARA - DirectorT. M. Z. MUTALIPH - Additional Director

Payments and Settlements DepartmentD. KUMARATUNGE - DirectorR. M. JAYAWARDENA - Additional DirectorA. M. GUNATHILAKE - Additional Director

Policy Review and Monitoring DepartmentA. M. N. GUNAWARDANA - DirectorS. R. SUMANASEKARA - Additional Director

Public Debt DepartmentT. H. B. SARATHCHANDRA - Superintendent and RegistrarC. P. S. BANDARA - Additional SuperintendentMRS. R. D. T. GUNASEKARA - Additional Superintendent

Regional Development DepartmentMRS. D. V. S. DAYAWANSA - DirectorA. M. R. K. ATTANAYAKE - Additional DirectorM. S. K. DHARMAWARDENA - Additional DirectorU. L. TILAKARATNE - Additional Director

Regional Office Management DepartmentD. M. RUPASINGHE - DirectorMRS. R. B. WEERASINGHE - Director(On Leave Prior to Retirement)

Risk Management DepartmentMRS. K. DASSANAYAKE - Director

Secretariat DepartmentK. H. A. S. ARIYARATNA - Secretary

Security Services DepartmentA. D. G. A. JAYAWARDANE - Director

Staff Services Management DepartmentB. W. JINASENA - DirectorMISS. K. G. R. K. DHEERASINGHE - Additional Director

Statistics DepartmentA. R. K. WIJESEKERA - DirectorM. Z. M. AAZIM - Additional Director

Training and Development DepartmentS. K. RANASINGHE - Director

MRS. K. M. A. N. DAULAGALA - Deputy Secretary to the Monetary Board

AUDITORH. M. GAMINI WIJESINGHE

Auditor General

CONTENTS

PART I

Page

1. ECONOMIC, PRICE AND FINANCIAL SYSTEM STABILITY, OUTLOOK AND POLICIES

1.1 Overview … … … … 1 1.2 Macroeconomic Developments, Stability and Policy Responses in 2016 … … … 2 Real Sector Developments and Inflation ... … … … 2 External Sector Developments ... … … … 9 Fiscal Sector Developments ... … … … 12 Monetary Sector Developments ... … … … 14 Financial Sector Developments ... … … … 181.3 Global Economic Environment and Outlook … … … … 191.4 Medium Term Macroeconomic Outlook … … … … 211.5 Issues and Policies … … … … 27

2. NATIONAL OUTPUT, EXPENDITURE AND INCOME

2.1 Overview … … … … 452.2 GDP, GDP Per Capita and Gross National Income (GNI) … … … … 472.3 Contribution from Institutional Sectors … … … … 472.4 Output, Policies, Institutional Support and Issues … … … … 49 Agriculture … … … … 49 Agriculture Production Index … … … … 49 Paddy … … … … 49 Tea … … … … 51 Rubber … … … … 52 Coconut … … … … 52 Minor Export Crops … … … … 53 Other Field Crops … … … … 54 Vegetables … … … … 54 Fruits … … … … 55 Sugar … … … … 55 Fisheries … … … … 56 Livestock … … … … 56 Forestry … … … … 57 Agriculture Policies and Institutional Support … … … … 58 Industries … … … … 64 Mining and Quarrying … … … … 65 Manufacturing … … … … 65 Factory Industry Production Index … … … … 65 Industrial Policies and Institutional Support … … … … 73

Electricity, Water and Waste Treatment … … … … 76 Construction … … … … 76 Services … … … … 77 Wholesale and Retail Trade … … … … 77 Transportation and Storage … … … … 78 Accommodation and Food Service Activities … … … … 78 Information and Communication … … … … 78 Financial, Insurance and Real Estate Activities including Ownership of Dwellings … 79 Professional Services and Other Personal Service Activities … … … 79

Public Administration, Defence, Education, Human Health and Social Work Activities … 79 2.5 Expenditure … … … … 82 Consumption … … … … 83 Investment … … … … 86 Availability and Utilisation of Resources … … … … 87 Savings … … … … 88 2.6 Income … … … 89

ECONOMIC AND SOCIAL INFRASTRUCTURE

3.1 Overview … … … … 913.2 Economic Infrastructure Policies, Institutional Framework and Performance … … 94 Communication Services … … … … 94 Petroleum … … … … 97 Electricity … … … … 99 Road Development ... … … … 103 Road Passenger Transportation ... ... ... … 105 Rail Transportation … … … … 107 Civil Aviation … … … … 108 Port Services ... … … … 109 Water Supply and Irrigation … … … … 1113.3 Social Infrastructure Policies, Institutional Framework and Performance … … … 112 Health … … … … 112 Education … … … … 115 Housing and Urban Development … … … … 119 Poverty Alleviation and Safety Nets … … … … 121 Environment … … … … 123 4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Overview ... … … … 1254.2 Prices … … … … 125 Price Movements and Contributory Factors … … … … 125 National Consumer Price Index (NCPI) … … … … 125 Colombo Consumer Price Index (CCPI) … … … … 126 Price Movements in the Food Category … … … … 128 Price Movements in Non-food and other Categories … … … 129 Core Inflation … … … … 129 Producer’s Price Index (PPI) … … … … 131 GDP Deflator … … … … 1314.3 Wages … … … … 131 Public Sector Wages … … … … 133 Private Sector Wages … … … … 1344.4 Population, Labour Force and Employment … … … … 134 Population … … … … 134 Labour Force … … … … 135 Employment … … … … 136 Unemployment … … … … 138 Foreign Employment … … … … 139 Labour Relations and Labour Market Reforms … … … … 141 Labour Productivity … … … … 142

5. EXTERNAL SECTOR DEVELOPMENTS AND POLICIES

5.1 Overview … … … … 1455.2 External Trade Policies, Developments and Institutional Support … … … 1475.3 Trade in Goods, Trade Balance, Terms of Trade and Direction of Trade … … … 153 Export Performance … … … … 153 Import Performance … … … … 159 Trade Balance … … … … 162 Terms of Trade … … … … 163 Direction of Trade … … … … 1645.4 Current and Capital Account … … … … 166 Trade in Services … … … … 166 Transport Services … … … … 166 Travel and Tourism … … … … 167 Telecommunications, Computer and Information Services … … … 170 Primary Income … … … … 171 Secondary Income … … … … 1715.5 Current Account Balance … … … … 1725.6 Capital Account Balance … … … … 172

7 Financial Account … … … … 172 Direct Investment … … … … 173 Portfolio Investment … … … … 174 Equity … … … … 174 Debt Securities … … … … 174 Other Investment … … … … 174 Currency and Deposits … … … … 174 Loans … … … … 175 Trade Credit and Advances and Other Accounts Receivable/Payable … … 177 Reserve Assets … … … … 1775.8 Overall Balance … … … … 1775.9 International Investment Position … … … … 177 Direct Investment Position … … … … 178 Portfolio Investment Position … … … … 178 Other Investment Position … … … … 179 Currency and Deposits … … … … 179 Loans … … … … 179 Trade Credit and Advances … … … … 179 Other Accounts Receivable/Payable and Special Drawing Rights … … … 179 Reserve Asset Position … … … … 1805.10 External Debt and Debt Servicing … … … … 181 External Debt … … … … 181 Foreign Debt Service Payments … … … … 1825.11 Exchange Rate Movements … … … … 183 Nominal and Real Effective Exchange Rates … … … … 184 Developments in the Domestic Foreign Exchange Market … … … … 185

6. FISCAL POLICY AND GOVERNMENT FINANCE

6.1 Overview … … … … 1896.2 Fiscal Policy Direction and Measures … … … … 1926.3 Government Budgetary Operations … … … … 204 Revenue and Grants … … … … 204 Revenue … … … … 204 Grants … … … … 207 Expenditure and Net Lending … … … … 208 Key Fiscal Balances … … … … 211 Financing the Budget Deficit … … … … 2126.4 Government Debt and Debt Service Payments … … … … 214 Government Debt … … … … 214 Debt Service Payments … … … … 216 Outstanding Debt of Major Public Nonfinancial Corporations … … … 2176.5 Budgetary Operations in Sub National Governments ... … … … 218 Policy Direction and Measures taken by Sub National Governments … … … 218 Budgetary Operations in Provincial Councils … … … … 219

7. MONETARY POLICY, INTEREST RATES, MONEY AND CREDIT

7.1 Overview … … … … 221 7.2 Monetary Policy Stance of the Central Bank of Sri Lanka … … … … 2227.3 Movements of Interest Rates … … … … 225 Market Liquidity, Market Operations and Short Term Interest Rates … … … 225 Yields on Government Securities … … … … 227 Deposit and Lending Interest Rates … … … … 228 Interest Rates on Debt Instruments … … … … 230 Interest Rates on Foreign Currency Deposits … … … … 2307.4 Movements of Monetary and Credit Aggregates … … … … 231 Reserve Money … … … … 231 Narrow Money (M1) … … … … 233 Broad Money (M2b) and Domestic Credit … … … … 233 Broad Money (M4) … … … … 2397.5 Future Developments, Challenges and Outlook … … … … 240

FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

8.1 Overview … … … … 243 8.2 Performance of the Banking sector … … … … 244 Business Growth … … … … 245 Risks in the Banking Sector … … … … 247 Profitability and Capital Resources … … … … 249 Supervisory and Regulatory Developments … … … … 2528.3 Performance of Non-Banking Financial Institutions … … … … 253 Licensed Finance Companies and Specialised Leasing Companies (LFCs/SLCs) sector … ... 253 Business Growth … … … … 253 Risks in the LFCs/SLCs sector … … … … 255 Profitability and Capital Resources … … … … 256 Action on Distressed Licensed Finance Companies … … … … 256 Supervisory and Regulatory Developments … … … … 257 Microfinance Institutions Sector … … … … 257 Primary Dealers in Government Securities … … … … 260 Assets and Liabilities … … … … 260 Risks in PD Sector … … … … 260 Profitability and Capital … … … … 261 Market Participation … … … … 261 Unit Trusts … … … … 261 Business Growth … … … … 262 Investment … … … … 262 Insurance Sector … … … … 262 Business Growth … … … … 263 Earnings … … … … 263 Capital and Investment … … … … 264 Supervisory and Regulatory Developments … … … … 264 Superannuation Funds … … … … 265 Employees’ Provident Fund … … … … 265 Employees’ Trust Fund … … … … 266 Other Superannuation Funds … … … … 2668.4 Performance of Financial Markets … … … … 267 Money Market … … … ... 267 Domestic Foreign Exchange Market … … … ... 268 Government Securities Market … … … ... 269 Corporate Debt Securities Market … … … ... 270 Colombo Stock Market … … … ... 2708.5 Development Finance and Access to Finance … … … … 2718.6 Financial Infrastructure … … … … 277 Payment and Settlement Systems … … … … 277 Credit Information … … … … 280

PART II

ACCOUNTS AND OPERATIONS OF THE CENTRAL BANK OF SRI LANKA 1-112

PART III

MAJOR ADMINISTRATIVE MEASURES ADOPTED BY THE MONETARY BOARD IN 2016 1-131

PART IV

MAJOR LEGISLATIVE ENACTMENTS OF 2016 RELATING TO THE FUNCTIONS ANDOPERATIONS OF THE CENTRAL BANK AND BANKING INSTITUTIONS IN SRI LANKA 1-12

STATISTICAL APPENDIX

SPECIAL STATISTICAL APPENDIX

PART I – TABLES

Page


1.1 Macroeconomic Performance (2012-2016) … … … … 3

1.2 Aggregate Demand and Savings-Investment Gap at Current Market Prices … … … 4

1.3 Gross National Income by Industrial Origin at Constant (2010) Prices … … … 7

1.4 Global Economic Developments and Outlook ... … … … 20

1.5 Medium Term Macroeconomic Framework … … … … 22


2.1 Gross Domestic Product by Industrial Origin at Constant (2010) Prices … … … 46

2.2 Gross Value Added by Institutional Sector at Current Prices … … … … 48

2.3 Agriculture Production Index (2007-2010=100) … … … … 49

2.4 Paddy Sector Statistics … … … … 50

2.5 Trends in Principal Agricultural Crops … … … … 53

2.6 Fish Production … … … … 56

2.7 Livestock Sector Statistics … … … … 57

2.8 Food Balance Sheet with Regards to Major Food Commodities … … … … 59

2.9 Factory Industry Production Index (FIPI) 2010=100 … … … … 66

2.10 Aggregate Demand … … … … 83

2.11 Composition of Private Consumption Expenditure at Current Market Prices … … … 84

2.12 Investment and Employment in Enterprises Registered under Board of

Investment of Sri Lanka (BOI) and Ministry of Industry and Commerce (MIC) … ... 87

2.13 Total Resources and Their Uses at Current Market Prices … … … … 88

2.14 Consumption, Investment and Savings at Current Market Prices … … … … 89

2.15 Income Components by Institutional Sector at Current Market Prices … … … 90

3. ECONOMIC AND SOCIAL INFRASTRUCTURE

3.1 Government Investment in Infrastructure … .... … … 92

3.2 Telecommunication Sector Performance ... … … … 95

3.3 Petroleum Sector Performance … ... … … 98

3.4 Electricity Sector Performance … ... … … 100

3.5 Salient Features of the Transport Sector … ... … … 107

3.6 Performance of Port Services … ... … … 110

3.7 Water Supply by National Water Supply & Drainage Board … … … … 112

3.8 Salient Features of Health Services … ... … … 113

3.9 Salient Features of General Education ... … … … 116

3.10 Salient Features of University Education ... … … … 118

3.11 Salient Features of Tertiary and Vocational Education and Training … … … 119

3.12 Poverty Head Count Ratio … … … … 121

3.13 Main Welfare Programmes - Number of Beneficiary Families and Value of Grants … … 123

4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Changes in Price Indices … ... … … 126

4.2 Contribution to Annual Average Inflation by Sub-category - 2016 ... … … 128

4.3 Retail Prices of Key Imported and Domestically Produced Items … … … … 129

4 Key Items with Administered Prices … ... … … 130

4.5 Sectoral Deflators and GDP Deflator … ... … … 131

4.6 Wage Rate Indices … ... … … 134

4.7 District-wise Population and Density … ... … … 135

4.8 Household Population, Labour Force and Labour Force Participation … … … 136

4.9 Employment by Economic Activity … ... … … 137

4.10 Status of Employment … ... … … 138

4.11 Public Sector Employment … ... … … 138

4.12 Unemployment Rate … … … … 139

4.13 Departures for Foreign Employment … ... … … 140

4.14 Foreign Employment Departures by Destination … ... … … 141

4.15 Strikes in Private Sector Industries … ... … … 142

4.16 Labour Productivity by Major Economic Sectors … ... … … 142


5.1 Balance of Payments Analytical Presentation … … … … 147

5.2 Composition of Exports … … … … 154

5.3 Composition of Imports … … … … 160

5.4 Volume of Major Imports … … … … 161

5.5 Trade Indices … … … … 163

5.6 Current and Capital Account … … … … 166

5.7 Performance in the Tourism Sector … … … … 170

5.8.A Financial Account … … … … 173

5.8.B Financial Account … … … … 175

5.9 Major Projects Financed with Foreign Borrowings during 2016 … … … … 176

5.10 International Investment Position … … … … 178

5.11 Gross Official Reserves, Total Foreign Assets and Overall Balance … … … 180

5.12 Outstanding External Debt Position … … … … 181

5.13 External Debt Service Payments … … … … 182

5.14 Exchange Rate Movements … … … … 184


6.1 Summary of Government Fiscal Operations … … … … 193

6.2 Economic Classification of Government Revenue … … … … 206

6.3 Economic Classification of Expenditure and Lending Minus Repayments … … … 209

6.4 Functional Classification of Expenditure … … … … 210

6.5 Sources of Domestic Financing … … … … 212

6.6 Outstanding Central Government Debt (as at end year) … … … … 214

6.7 Government Debt Service Payments … … … … 216

6.8 Central Government Debt Indicators … … … … 217

6.9 Outstanding Debt of Major Public Nonfinancial Corporations (as at end year) … … 218

6.10 Budget Outturn for Provincial Councils … … … … 220


7.1 Recent Monetary Policy Measures … … … … 224

7.2 Selected Money Market Rates … … … … 226

7.3 Movements of Interest Rates … … … … 231

7.4 Developments in Monetary Aggregates … … … … 234

7.5 Assets Side of Reserve Money and Broad Money (M2b) … … … … 235

6 Classification of Outstanding Credit to the Private Sector Granted by Commercial Banks … … 238

7.7 Maturity Analysis of Outstanding Credit to the Private Sector by Commercial Banks … … 239

7.8 Assets Side of Broad Money (M4) … … … … 240

8. FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

8.1 Total Assets of the Financial System … … ... … 244

8.2 Distribution of Banks and Bank Branches ... … ... … 245

8.3 Composition of Assets and Liabilities of the Banking Sector ... … ... … 246

8.4 Composition of Deposits of the Banking Sector ... … ... … 246

8.5 Composition of Statutory Liquid Assets of the Banking Sector … ... … … 248

8.6 Profit of the Banking Sector … ... … … 249

8.7 Composition of Regulatory Capital of the Banking Sector … … … ... 252

8.8 Distribution of Branches of the LFCs/SLCs Sector by Province … … … … 254

8.9 Composition of Assets and Liabilities of the LFCs/SLCs Sector … … … ... 254

8.10 Composition of Income and Expenses of the LFCs/SLCs Sector … … … ... 256

8.11 Composition of Regulatory Capital of the LFCs/SLCs Sector … … … ... 257

8.12 Performance of Primary Dealers … … … ... 260

8.13 Performance of UT Sector … … ... … 262

8.14 Performance of the Insurance Sector … … … ... 262

8.15 Performance of EPF and ETF ... … ... … 266

8.16 Money Market Transactions ... … ... … 267

8.17 Primary Market Treasury Bond Issuances ... … ... … 269

8.18 Primary Market Weighted Average Yield Rates of Treasury Bills ... … ... … 269

8.19 Yield Rates of Government Securities ... … ... … 269

8.20 Selected Indicators of CSE ... … ... … 271

8.21 Transactions through Payment Systems ... … ... … 277

PART I – CHARTS

Page


1.1 Activity-wise Contribution to GDP Growth … … … ... 3 1.2 Savings, Investment and the Savings-Investment Gap (as a percentage of GDP) … ... 41.3 Unemployment … … … ... 71.4 Headline Inflation (Year-on-Year) … … … ... 81.5 Balance of Payments … … … ... 91.6 Central Bank Intervention in the Domestic Foreign Exchange Market and the Exchange Rate ... 121.7 Revenue, Expenditure and Overall Fiscal Balance (as a percentage of GDP) … … ... 13 1.8 Central Government Debt (as a percentage of GDP) … … … ... 141.9 Standing Rate Corridor and Selected Market Interest Rates … … … … 151.10 Broad Money Growth and Contribution … … ... ... 171.11 Credit granted by Commercial Banks to the Private Sector … … … … 17


2.1 Annual Growth Rate … … … ... 47 2.2 Rice: Supply and Demand … … … ... 512.3 Gross Value Addition in Industries (2010 Constant Prices) … … … ... 642.4 Purchasing Managers’ Index … … … ... 652.5 Factory Industry Production Index (2010 =100) … … … ... 672.6 Composition of Factory Industry Production Index (FIPI) - 2016 … … … ... 722.7 Year-on-Year Change in Major Divisions of FIPI … … … ... 732.8 Foreign Direct Investment of BOI Enterprises (US$ million) … … … ... 86 2.9 The Economy in 2016 (at Current Market Prices) … … … ... 88

3. ECONOMIC AND SOCIAL INFRASTRUCTURE

3.1 Telephone Penetration … … … ... 943.2 Average Price of Crude Oil (Brent) in the International Market and the Crude Oil Import Price of the CPC … … … ... 973.3 Electricity Generation Mix … … … ... 1003.4 Average Cost and Average Tariff of Electricity … … ... ... 1013.5 New Registration of Motor Vehicles … … … ... 1063.6 Air Passenger and Air Cargo Handling … … … ... 1083.7 Container Handling, Transshipment Volume and Ship Arrivals … … … ... 1103.8 Government Expenditure on Health and Education … … … ... 115

4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Movements of Inflation (NCPI (2013=100) and CCPI (2013=100)) ... ... … 1264.2 Movements of Year-on-Year Core Inflation … … … ... 131 4.3 Trends in Labour Force & Unemployment (2012-2016) … … ... … 136


5.1 Balance of Payments … … … … 1465.2 Composition of Exports - 2016 … … … … 1535.3 Composition of Imports - 2016 … … … … 1605.4 Exports, Imports and Trade Balance … … … … 162 5.5 Terms of Trade and Trade Indices … … … … 1635.6 Exports by Destination … … … … 1655.7 Imports by Origin … … … … 1655.8 Tourist Arrivals by Country - 2016 … … … … 167

9 Tourist Arrivals and Earnings from Tourism … … … … 1685.10 Financial Account … … … … 1725.11 Quarterly Gross Official Reserves and Total Foreign Assets … … … … 1805.12 External Debt … … … ... 1815.13 Exchange Rate Movements … … … ... 183

5.14 Quarterly Inter-Bank Forward Transaction Volumes … … … … 185


6.1 Major Fiscal Indicators (as a percentage of GDP) … … … … 1926.2 Composition of Government Revenue – 2016 … … … … 2056.3 Composition of Government Recurrent Expenditure – 2016 … … … … 2096.4 Total Expenditure by Function – 2016 … … … … 2106.5 Deficit Financing (as a percentage of GDP) … … … … 212 6.6 Sources of Bank Financing … … … … 2136.7 Outstanding Central Government Debt … … … … 2146.8 Composition of Outstanding Domestic Debt - 2016 … … … … 215 6.9 Composition of Outstanding Foreign Debt - 2016 … … … … 2156.10 Currency Composition of Total Outstanding Debt - 2016 … … … … 216

6.11 Government Debt Service Payments (as a percentage of GDP) … … … … 217


7.1 Policy Interest Rates and Average Weighted Call Money Rate (AWCMR) … … … 2227.2 Rupee Liquidity in the Domestic Money Market and Liquidity Management … … … 2267.3 Movements of Sri Lanka Interbank Offered Rates (SLIBOR) … … … … 2277.4 Primary Market Treasury Bill Yields … … … 2287.5 Secondary Market Yield Curve for Government Securities … … … 2287.6 Selected Market Interest Rates … … … … 2297.7 Average Weighted Lending Rates by Type of Security (%) … … … … 2297.8 Spread Between Average Lending and Deposit Rates … … … 2307.9 Currency in Circulation … … … … 2327.10 Central Bank Treasury Bill Holdings and Provisional Advances to the Government … … 2327.11 Year-on-Year Growth of Monetary Aggregates … … … … 2337.12 Contribution to Year-on-Year Change in Broad Money - M2b (Assets Side) … … … 2357.13 Annual Increase in Domestic Credit … … … … 2367.14 Credit to the Private Sector by Commercial Banks … … … … 2377.15 Year-on-Year Growth of Private Sector Credit to Key Sectors (%) … … … 238

8. FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

8.1 Off-Balance Sheet Exposures of the Banking Sector (as at end 2016) … … … 2468.2 NPLs of the Banking Sector ... ... … … 2478.3 Provisioning for NPLs of the Banking Sector … … … … 2478.4 Credit Exposure of the Banking Sector (as at end 2016) … … … … 247 8.5 Liquidity Ratios of the Banking Sector … … … … 2488.6 Cumulative Maturity Gap as a percentage of Cumulative Liabilities of the Banking Sector … … … … 2488.7 Profitability Indicators of the Banking Sector … … … … 2498.8 Capital Adequacy of the Banking Sector … … … … 2498.9 Product wise Loans & Advances of the LFCs/SLCs Sector … … … … 2558.10 Non-performing Loans and Provision Coverage of the LFCs/SLCs Sector … … … 2558.11 Profitability Indicators of the LFCs/SLCs Sector … … … … 2568.12 Categorisation of the UT Sector in terms of the Net Asset Value … … … … 2628.13 Gross Written Premium of the Insurance Sector … … … … 2638.14 ASPI, S&P SL20 Index & Daily Turnover at the CSE … … … … 271

8.15 Foreign Participation at the CSE … … … … 271

PART I - BOXES

1. Model Based Approach to Monetary Policy Analysis in Sri Lanka … … … 24

2. Improving Sri Lanka’s Competitiveness within Global Markets … … … … 30

3. Towards a Manufacturing Sector Development Strategy … … … … 68

4. Business Intelligence and Big Data: A New Dimension of Central Bank Statistics ... ... 80

5. Evolution of Consumer Price Indices in Sri Lanka … … ... ... 127

6. Measuring Wage Trends in the Economy ... ... ... ... 132

7. National Strategy towards Export Promotion … … ... ... 155

8. Sri Lankan Experience in Foreign Exchange Transactions - Evolution of

Exchange Controls, Relaxations and Way Forward … … ... ... 186

9. Revenue Based Fiscal Consolidation towards Sustainable Level of Debt ... ... ... 201

10. Strengthening Capital Regulations to enhance the Resilience of Banks ... ... ... 250

11. Regulatory Framework under the Microfinance Act, No. 6 of 2016 … ... ... 258

12. Promoting Sustainable Finance for Sustainable Development … … ... ... 273

13. The Role of the Central Bank of Sri Lanka in the Regulation of Payment Systems ... ... 278

14. Sri Lanka’s Compliance with International AML/CFT Standards … … ... ... 281

STATISTICAL APPENDIX

Table

NATIONAL OUTPUT, EXPENDITURE AND INCOME

Gross National Income by Industrial Origin at Current Market Prices … … … 1

Gross National Income by Industrial Origin at Constant (2010) Prices … … … 2

Gross National Income by Industrial Origin … … … … 3

Provincial Gross Domestic Product by Industrial Origin at Current Market Prices (2011-2015) … 4

Resources and their Utilisation … … … … 5

Reconciliation of Key Aggregates at Current Market Prices … … … … 6

Gross Domestic Capital Formation at Current Market Prices … … … … 7

Composition of Private Consumption Expenditure at Current Market Prices … … … 8

Expenditure on Gross National Income at Current Market Prices … … … … 9

Gross Domestic Expenditure and Availability of Resources at Current Market Prices … … 10

Investment and Savings at Current Market Prices … … … … 11

Real National Income … … … … 12

Income Components of Gross Domestic Product … … … … 13

Trends in Principal Agricultural Crops … … … … 14

Production of Tea, Rubber, Coconut and Other Export Agriculture Crops … … … 15

Annual Rainfall and Rainy Days … … … … 16

District-wise Performance of the Paddy Sector … … … … 17

Paddy Production … … … … 18

Performance of Other Field Crops … … … … 19

Land Cultivated under the Mahaweli Development Programme … … … … 20

Statistics of the Sugar Sector … … … … 21

Statistics on the Forestry Sector … … … … 22

Investment Approvals in Industry by the Board of Investment (BOI) of Sri Lanka … … … 23

Realised Investments in the BOI Enterprises … … … … 24

Foreign Direct Investment of BOI Enterprises by Sector … … … … 25

Table

Capacity Utilisation in Factory Industry … … … … 26

Employment in Selected State Owned Industrial Enterprises … … … … 27

Performance of Selected State Owned Industrial Enterprises … … … … 28

Regional Distribution of Industrial Enterprises … … … … 29

Major Divisions of Factory Industry Production Index (FIPI) … … … … 30

Factory Industry Production Index (FIPI) … … … … 31

ECONOMIC AND SOCIAL INFRASTRUCTURE

Performance of Telecommunications and Postal Services … … … … 32

Performance of the Energy Sector … … … … 33

Salient Features of the Transport Sector … … … … 34

Performance of the Port Services … … … … 35

Salient Features of Government Health Services … … … … 36

Salient Features of General and University Education … … … … 37

PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

Movement of the National Consumer Price Index (2013=100) … … … … 38

Movement of the Colombo Consumer Price Index (2013=100) … … … … 39

Movement of the Colombo Consumer Price Index (2006/07=100) … … … … 40

National Consumer Price Index (2013=100) … … … … 41

Colombo Consumer Price Index (2013=100) … … … … 42

Colombo Consumer Price Index (2006/07=100) … … … … 43

Producer’s Price Index … … … … 44

Average Retail Prices of Selected Food Items by Province 2015-2016 … … … 45

Wholesale Prices of Selected Commodities … … … … 46

Wage Rate Indices (Government Employees) … … … … 47

Wage Rate Indices (Workers in Wages Boards Trades) … … … … 48

Wage Rate Indices (Informal Private Sector Employees) … … … … 49

Average Daily Wages in the Informal Sector … … … … 50

Average Daily Wages of Informal Sector by Province 2015-2016 … … … … 51

Demography … … … … 52

Population by District … … … … 53

Labour Force Participation Rate … … … … 54

Status of Employment … … … … 55

Employment by Economic Activity … … … … 56

Labour Force Trends … … … … 57

Public Sector Employment … … … … 58

Foreign Employment … … … … 59

Employees’ Provident Fund … … … … 60

Employees’ Trust Fund … … … … 61

Strikes in Private Sector Industries … … … … 62

EXTERNAL SECTOR DEVELOPMENTS AND POLICIES

Central Bank Trade Indices – Value … … … … 63

Central Bank Trade Indices – Volume … … … … 64

Central Bank Trade Indices – Unit Value … … … … 65

Foreign Trade … … … … 66

Composition of Exports … … … … 67

Tea Exports, Sales and Prices … … … … 68

Volume and Value of Tea Exports … … … … 69

Table

Country Classification of Tea Exports … … … … 70

Rubber Exports and Prices … … … … 71

Major Rubber Export Destinations … … … … 72

Country Classification of Garment Exports … … … … 73

Export Volume, Values and Prices of Major Coconut Products … … … … 74

Export Volume and Values of Other Agricultural Products … … … … 75

Selected Industrial and Mineral Exports … … … … 76

Imports by Major Categories … … … … 77

Composition of Imports … … … … 78

Exports and Imports of Major Commodities … … … … 79

Direction of Trade - Exports … … … … 80

Direction of Trade - Imports ... ... ... ... 81

Performance in the Tourism Sector … … … … 82

Some Indicators of the Regional Distribution of Tourism … … … … 83

Balance of Payments - Standard Presentation under BPM6 Format … … … … 84

International Investment Position - Standard Presentation under BPM6 Format … … … 85

Services and Income … … … … 86

Workers’ Remittances … … … … 87

Outstanding External Debt ... … … … 88

End of Period Exchange Rates … … … … 89

Average Exchange Rates of Major Currencies and Monthly Indices of Nominal Effective

Exchange Rate (NEER) and Real Effective Exchange Rate (REER) … ... … 90

Interbank Forward Market Transactions … … … … 91

Absorption and Supply of Foreign Exchange by the Central Bank … … … … 92

FISCAL POLICY AND GOVERNMENT FINANCE

Summary of Government Fiscal Operations … … … … 93

Government Revenue … … … … 94

Payments of the Government of Sri Lanka … … … … 95

Voted Expenditure of the Government of Sri Lanka – 2016 … … … … 96

Voted Expenditure of the Government of Sri Lanka – 2017 … … … … 97

Current Transfers to Public Corporations and Institutions … … … … 98

Capital Transfers to Public Corporations and Institutions … … … … 99

Acquisition of Financial Assets (Loan Outlays) … … … … 100

Financing of the Government Net Cash Deficit … … … … 101

Economic Classification of Government Revenue … … … … 102

Economic Classification of Government Expenditure and Lending Minus Repayments … … 103

Economic Classification of Government Fiscal Operations … … … … 104

Composition of Outstanding Government Debt … … … … 105

Ownership of Government Debt (as at end of the year) … … … … 106

Ownership of Treasury Bills … … … … 107

Ownership of Treasury Bonds … … … … 108

Ownership of Rupee Loans … … … … 109

Ownership of Outstanding Foreign Debt … … … … 110

Foreign Loans – 2016 … … … ... 111

Net Receipts of Foreign Assistance … … … … 112

Outstanding Central Government Debt (as at end of the year) … … … … 113

Budget Outturn for Provincial Councils … … … … 114

Consolidated Budget … … … … 115

Table

MONETARY POLICY, INTEREST RATES, MONEY AND CREDIT

Currency Issued by the Central Bank (by Denomination) … … … … 116

Monetary Aggregates – M1 and M2 … … … … 117

Monetary Survey – M2 … … … … 118

Consolidated Monetary Survey – M2b … … … … 119

Financial Survey – M4 … … … … 120

Monetary Aggregates - Summary … … … … 121

Reserve Position of Commercial Banks … … … … 122

Money Rates: The Central Bank and Commercial Banks … … … … 123

Money Rates: Savings and Long Term Credit Institutions … … … … 124

Yield Rates on Government Securities … … … … 125

Commercial Banks’ Loans and Advances by Type of Security (End of Period) … … … 126

Commercial Banks’ Loans and Advances to the Private Sector … … … … 127

FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

Assets and Liabilities of the Central Bank … … … … 128

Assets and Liabilities of Domestic Banking Units (DBUs) of Commercial Banks … … … 129

Assets and Liabilities of Offshore Banking Units (OBUs) of Commercial Banks … … … 130

Financial Soundness Indicators - Banking Industry … … … … 131

Financial Soundness Indicators - Licensed Commercial Banks (LCBs) … … … 132

Financial Soundness Indicators - Licensed Specialised Banks (LSBs) … … … 133

Assets and Liabilities of Non-Bank Financial Institutions … … … … 134

Financial Soundness Indicators - LFCs and SLCs Sector … … … … 135

Financial Soundness Indicators - Licensed Finance Companies … … … … 136

Financial Soundness Indicators - Specialised Leasing Companies … … … … 137

Savings and Fixed Deposits of Deposit-taking Institutions … … … … 138

Insurance Activities … … … … 139

Share Market Performance … … … … 140

Debentures Listed on Colombo Stock Exchange (CSE) in 2016 … … … … 141

Total Cultivation Loans Granted by the Lending Banks (Position as at 31 December 2016) … … 142

New Comprehensive Rural Credit Scheme – Loans Granted for Subsidiary Food Crops by

the Lending Banks (Position as at 31 December 2016) … … … … 143

Operations of the Crop Insurance Programme – Paddy Sector

(Position as at 31 December 2016) … … … … 144

Deposits and Advances of District Co-operative Rural Banks (2006 – 2016) and

District-wise Classification for 2016 … … … ... 145

Deposits and Advances of District Co-operative Rural Banks’ Unions (2008 – 2016) and

District-wise Classification for 2016 … … … … 146


Definitions and Explanatory Notes on Statistical Tables

The following general notes supplement the footnotes given below the individual tables:

1. In an attempt to bring the material up-to-date, provisional figures are included in some tables.

2. Figures in some tables have been rounded off to the nearest final digit. Hence, there may be

a slight discrepancy between the total as shown and the sum of its components.

3. Differences as compared with previously published figures are due to subsequent revisions.

4. Values indicated within parenthesis are negative values.

5. The following symbols have been used throughout:-

... = negligible

- = nil

n.a. = not available

n.e.c. = not elsewhere classified

n.e.s. = not elsewhere specified

n.i.e. = not included elsewhere


Table

1. Real Sector

Population and Labour Force … … … ... 1

National Output … … … ... 2

Prices … … … ... 3

2. External Sector

Balance of Payments … … … ... 4

Reserves, Total Foreign Assets, External Debt and Exchange Rates … … ... 5

3. Fiscal Sector

Government Fiscal Operations … … … ... 6

Government Debt … … … ... 7

4. Monetary Sector

Monetary Survey (M2) … … … ... 8

Interest Rates … … … ... 9

5. Socio-economic Conditions

Key Socio-economic Indicators in Sri Lanka Based on

Consumer Finances and Socio-economic Surveys -1953 - 2003/04 ... ... ... 10

Key Socio-economic Indicators by Province Based on

Consumer Finances and Socio-economic Survey - 2003/04 ... ... ... 11

Key Socio-economic Indicators by Province Based on

Household Income and Expenditure Survey - 2012/13 … ... ... ... 12

Key Socio-economic Indicators by Sector

Based on Household Income and Expenditure Survey

2006/07, 2009/10 & 2012/13 … ... ... ... 13

central bank of sri lankadr. indrajit coomaraswamy governor central bank of sri lanka 30,...

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