By: Staff Writer
January 14, Colombo (LNW): Sri Lanka’s external sector maintained its positive momentum in 2024, marking two consecutive years of current account surpluses—a rare achievement in the country’s recent history, the Central Bank announced.
The Balance of Payments position strengthened further, with the Central Bank purchasing over $2.8 billion in foreign exchange from the domestic market, the highest-ever annual net purchase.
Consequently, gross official reserves rose to $6.1 billion by the end of 2024, up from $4.4 billion in 2023.
The Central Bank adhered to its flexible exchange rate policy, complemented by the Flexible Inflation Targeting (FIT) framework, which contributed to the Sri Lankan rupee appreciating and stabilizing throughout the year.
These developments were driven by improved market sentiment and steady net forex inflows.The financial sector demonstrated enhanced resilience and stability in 2024 as the lingering effects of the economic crisis subsided.
The banking sector reported growth in gross loans and receivables, alongside a declining non-performing loan (NPL) ratio, indicating reduced default risks. Liquidity Coverage Ratios (LCRs) consistently exceeded regulatory minimums, and the Return on Equity (ROE) and Capital Adequacy Ratio (CAR) also showed marked improvements.
Similarly, finance companies recorded recovery in loans, advances, and profitability, while financial markets operated with low stress due to better macroeconomic conditions and investor confidence.
The Central Bank advanced its regulatory and governance frameworks to ensure financial stability. The Banking (Amendment) Act and related directives addressed areas such as large exposures, corporate governance, liquidity ratios, and related party transactions.
A Bank Recapitalisation Strategy was also developed to restructure and recapitalize nine large domestic banks, enhancing their stability and resilience. Additionally, the Depositor-wise Data Collection System was introduced to improve compensation efficiency under the Sri Lanka Deposit Insurance Scheme (SLDIS), ensuring streamlined depositor information management.
In 2024, the Central Bank achieved significant milestones in strengthening the resolution framework under the Banking (Special Provisions) Act (BSPA). This included the formulation of resolution policies and directives to licensed banks for effective resolution planning, contributing to a more robust financial sector.
Overall, 2024 marked a year of resilience and progress for Sri Lanka’s external and financial sectors, with significant strides in stability, regulatory reform, and economic recovery.
