Sri Lanka’s central bank has laid out the extent of the country’s worst economic crisis in more than 70 years.

In its annual report, the bank outlined how last year wages failed to keep up with the soaring cost of everything from food to fuel.

“Several inherent weaknesses” and “policy lapses” helped to trigger the severe economic problems that engulfed the South Asian nation, the bank says.

The bank now expects the economy to return to growth next year.

The Central Bank of Sri Lanka forecast the economy will shrink by 2% this year, but expand by 3.3% in 2024.

The prediction is more optimistic than the International Monetary Fund (IMF), which forecast a contraction in 2023 of around 3% and growth of 1.5% next year.

The central bank’s report also outlined how headline inflation reached almost 70% in September as prices of fresh fruit, wheat and eggs more than doubled.

At the same time the cost of transportation and essential utilities such as electricity and water rose even faster.

Last year, the economy shrank by 7.8% and the country defaulted on its foreign debt for the first time since independence from the UK in 1948.

Defaults happen when governments are unable to meet some or all of their debt payments to creditors.

This damaged its reputation with lenders, making it even harder to borrow money on the international markets.

“The Sri Lankan economy faced its most onerous year in its post-independence history,” the report said.

An “unsustainable” economic model “steered the country towards a multifaceted disaster,” it added.

Sri Lanka owes about $7bn (£5.7bn) to China and around $1bn to India. In February, both countries agreed to restructure their loans, giving Sri Lanka more time to repay them.

Last month, the IMF agreed to lend Sri Lanka $3bn. That was on top of a $600m loan from the World Bank last year.

Sri Lanka’s government is currently negotiating its debt repayments with bondholders and creditors before the IMF reviews the situation in September.

BBC

In a significant development, the Sri Lankan parliament has passed the resolution for the implementation of the arrangement under the Extended Fund Facility (EFF) of the International Monetary Fund (IMF).

The resolution, which received 120 votes in favor and 25 against, is a crucial step towards strengthening Sri Lanka’s economic stability and achieving sustainable growth.

The IMF’s EFF program aims to support countries that are facing balance of payment difficulties and require financial assistance to address their macroeconomic imbalances. Sri Lanka had requested the IMF’s assistance in May 2020 to address the economic fallout from the COVID-19 pandemic and the structural challenges facing the country’s economy.

The EFF program for Sri Lanka is worth approximately $1.5 billion and will be disbursed in six tranches over the next three years. The program’s main objectives are to support Sri Lanka’s macroeconomic stability, improve public finances, and promote structural reforms to enhance the country’s economic resilience.

1. Russian Ambassador in SL – Levan Dzhagaryan says sanctions imposed by the US on SL’s former Navy Commander Wasantha Karannagoda are totally unacceptable: previously, US State Dept announced that Karannagoda, the current Governor of North Western Province, and his family are banned from entering the US over “violation of human rights”: SL Govt has also expressed grave concerns about the US action.
2. Justice Minister Wijeyadasa Rajapakshe says the Govt will delay the tabling of the Anti-Terrorism Act in Parliament until broader consensus is reached.
3. NPP Leader Anura Kumara Dissanayake claims there’s a connection between the IMF loan and the CB Governor Nandalal Weerasinghe’s decision to default on foreign debt: also says the decision to default had been taken
   even though money had been allocated from the budget: labels decision as “conspiratorial”: similar allegations against Governor Weerasinghe have been made by several MPs: reports show pipeline of inflows at the time of the sudden default announcement was a massive USD 10.7 billion.
4. Shares at the CSE fall further: investors await more clarity on local debt restructuring: ASPI falls below 9000 to 8983.
5. Dept of Census & Statistics says the Overall Rate of Inflation, as measured by CCPI dropped to 35.3% in Apr’23, compared to 50.3% in Mar’23: analysts allege the Census Dept arbitrarily changed it’s base for the calculation of the CCPI from Feb’23 onwards to reflect and report a lower CCPI.
6. CB Annual Report 2022 states “stunting” and “wasting” among children under 5 years had increased to 9.2% and 10.1% in 2022, from 7.4% and 8.2% in 202
7. SriLankan Airlines Chairman Ashok Pathirage says “privatization” of the airline would help as long as the right partner is found: Airline’s CEO Richard Nuttall says there is a need to reactivate the fleet and replace the aircraft with expiring leases.
8. Committee on Parliamentary Business decide to take the Sri Lanka Central Bank Bill for debate (second reading) on 11th May.
9. Parliament approves Sri Lanka’s Agreement with the IMF with 120 voting for and 25 against: 80 MPs abstain: strong IMF & Default proponent Harsha de Silva, and SJB MPs walk out at voting time: former President Mahinda Rajapaksa votes for: MPs G L Pieris, Wimal Weerawansa, Vasudeva Nanayakkara vote against: Namal Rajapaksa not present.
10. SL win 2nd Cricket Test against Ireland by an innings & 10 runs: SL – 704/3d (Kusal Mendis 245, Nishan Madushka 205, Dimuth Karunaratne 115, Angelo Mathews 100*) IRE – 492 & 202: SL win series 2-0: Prabath Jayasuriya becomes fastest in the world to take 50 Test wickets as a spinner and fastest SL bowler to take 50 Test wickets.

Hon. Lasantha Alagiyawanna, Chair of the Committee on Public Accounts (COPA), has instructed the Department of Police to provide a proposed information technology (IT) program within a month. The directive came during a meeting held on April 26, where the Sri Lanka Police was summoned to examine the Auditor General’s report and current performance for the years 2019, 2020, and 2021.

The meeting, attended by senior police officials, also addressed other issues such as the lack of female police officers, expired tear gas, language skills of police officers, police promotions, and crime control.

During the meeting, it was highlighted that a recommendation made in 2016 to establish an IT system for the Sri Lanka Police has not been implemented. The Inspector General of Police stated that a new pilot project is being implemented in Hatton and Nuwara Eliya Police Stations, and steps will be taken to introduce IT systems in segments due to the difficulty of setting up a single system.

The Committee Chair emphasized the importance of integrating the motor transport department and other institutions to obtain relevant information immediately and instructed the Sri Lanka Police to submit a report on the current and proposed IT program within a month.

The meeting also revealed that there are 2419 female police constable vacancies, and efforts are being made to complete them by 2023. The Inspector General of Police stated that reforms have been initiated to provide opportunities for women in higher positions, including the post of Inspector General of Police.

The Committee also instructed the disposal of expired tear gas across all police stations in Sri Lanka and called for a report on measures taken to control public riots, including tear gas. The need to improve the language skills of police officers was also emphasized.

The Annual Report of the Central Bank of Sri Lanka (CBSL) 2022 was presented by Central Bank Governor Dr. Nandalal Weerasinghe to the Minister of Finance Economic Stabilization and National Policies, President Ranil Wickremesinghe at the Ministry of Finance today (27).Presented as the 73rd Annual Report of the CBSL, this report consists of four main parts.

Accordingly, the first part consists of 08 chapters and 30 sub-chapters explaining the state of the economic affairs of the year, while the second part consists of a collection of gazettes and circulars related to various policy measures taken by the Government and the CBSL. The third part of this report explains the departments of the CBSL and their related roles and the fourth part includes a list of laws and ordinances related to the banking system connected to the Government and the CBSL.

In accordance with Section 35 of the Monetary Law Act, the Monetary Board of the CBSL is required to produce an annual report on the economic conditions and the policies taken for that year and submit it to the Minister of Finance within four months after the end of the relevant year.

Secretary of the Ministry of Finance Mr Mahinda Siriwardana, Director of the Economic Research Department of the Central Bank of Sri Lanka Dr. P.K.G.Harishchandra, Additional Directors of Economic Research Dr. Mrs. S. Jegajeevan and Dr. L. R. C. Pathberiya participated in this event.

The official announcement issued by the CBSL in this regard is shown in Annexure 01 below.

The 2022 annual report of the Central Bank of Sri Lanka can be accessed through the link below. https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-reports

The National Water Supply and Drainage Board has announced that it is necessary to increase water tariffs to cover additional costs incurred by the recent hike in electricity charges.

According to Deputy General Manager N.K. Ranatunga, while water tariffs were increased after a decade, they were not revised in line with the January 2023 electricity tariff increase.

Ranatunga highlighted that the Water Board had to bear an extra cost of Rs 4 billion due to the electricity tariff hike and warned that the board cannot continue to bear additional expenses for long.

The announcement comes amid growing concerns over the impact of rising utility prices on households in the country.