Strengthening financial stability after Easter attacks
Sri Lanka will be taking austerity measures to strengthen financial sector stability in the wake of economic instability inflicted in the aftermath of the Easter Sunday terror, official sources said.
The Treasury has already tightened fiscal policy controlling government expenditure while diverting the cash flow towards meeting out defence expenses.
A sum of around Rs.4.12 billion has been set apart for current defence spending in addi
tion to Rs.393 billion allocated from the 2019 budget, a senior Finance Ministry official said.
Meanwhile the Central Bank (CB) will continue to pursue a prudent monetary policy while concentrating on building foreign reserves with exchange rate flexibility to protect the economy against shocks.
It will also strengthen supervision of financial institutions and crisis- preparedness machinery to maintain financial sector stability, it said in a statement.
A decline in the manufacturing sector is mainly driven by the significant drop in new orders and production especially in the manufacture of food, beverages and tobacco and manufacturing of textiles, apparels, leather and related products, the CB said.
Most industries especially in textile and apparel sector highlighted that they had to restrict working hours in factories due to security concerns and were unable to achieve the desired production levels, CB said.
Services sector also deteriorated in April compared to March, underpinned by a decline in all five sub- indices, namely - new businesses, business activity, employment, backlog of work and expectations for activity.
This was the first time that services recorded a setback, since May 2015, a senior CB official said.
The Sri Lankan economic growth will be affected by the terror attacks as investor confidence took a beating while the Sri Lankan rupee would depreciate further due to outflow of foreign funds.
The country’s economic growth rate will have to be downgraded from 3.6 per cent if the current situation continues further, he warned.
An outflow of portfolio investment amounting to Rs. 3.3 billion was recorded after the Easter terror attack, he revealed.
While the tourism sector will be the most affected, its spillover impact will be felt in the food and beverage sector as well as manufacturing and service sectors too, he added.
Credit to public corporations recorded a decrease of Rs. 12.2 billion while private sector credit increased by Rs. 23.1 billion, CB data showed.
Total outstanding market liquidity was a surplus of Rs. 61.537 billion by the end of last week, compared to a surplus of Rs. 44.61 billion earlier, the CB revealed.