The sixty fifth Annual Report of the Monetary Board of the Central Bank of Sri Lanka was handed over to Ravi Karunanayake, the Minister of Finance by Arjuna Mahendran, the Governor of the Central Bank of Sri Lanka on 29 April 2015.
According to the report, the growth momentum of the Sri Lankan economy continued, while inflation declined further to low single digit levels during the year. The economy that was initially projected to grow in real terms by 7.8 per cent, recorded a growth of 7.4 per cent in 2014, in comparison to the growth of 7.2 per cent in 2013.
Prudent monetary policy as well as the considerable decline in global commodity prices in the second half of the year enabled the deceleration of inflation to low single digit levels during the year. In spite of the relatively relaxed monetary policy stance, the effect of declining pawning advances shrouded the pickup of credit obtained by the private sector, particularly in the first seven months of the year. In the absence of demand pressures on inflation, the Central Bank took measures to facilitate further credit disbursements by banks.
However, these measures, along with volatile global conditions, caused some portfolio investment outflows and encouraged imports, increasing the pressure on the external sector and the exchange rate towards the latter part of the year. Overall, the trade deficit widened in nominal terms during the year, although inflows from trade in services and workers, remittances supported the reduction of the deficit in the current account.
This, together with other financial inflows, helped strengthen the balance of payments (BOP), and hence gross official reserves. Meanwhile, in the fiscal sector, despite the government, s announced commitment towards fiscal consolidation, the overall fiscal deficit increased to 6.0 per cent of GDP in 2014 from 5.9 per cent of GDP in the previous year, mainly as a result of the continued shortfall in revenue collection.(CBSL)