The Economic Research Department of the Central Bank of Sri Lanka says that according to provisional data, the overall fiscal performance has improved during the first five months of 2016.
The department says that Government revenue as a percentage of estimated GDP has increased to 5.% during the first five months of 2016. Total expenditure and net lending during the first five months of 2016 remained unchanged at 7.2% of estimated GDP compared to the same period in 2015.
Consequently, the overall budget deficit declined to 2.3% of estimated GDP during the first five months of 2016 compared to 2.7% recorded in the corresponding period of 2015.
The Monetary Board considers that further tightening of monetary policy is required to curb excessive demand to pre-empt the escalation of inflation pressures.
“Tightening of monetary policy will ensure the maintenance of inflation at mid-single digits in the medium term, which is supportive of the growth momentum of the economy.”
“The adjustment is not expected to have significant impact on the long end of the yield curve.” “The year-on-year growth of credit to the private sector recorded a marginal decline to 28.0 % in May 2016 from 28.1% in April 2016.”
“Provisional data indicates that the high growth of credit to the private sector has continued during the month of June as well.”
Meanwhile both headline and core inflation reflect an increasing trend in 2016. The gradual increase in core inflation over the past few months reflects the rise in demand driven inflationary pressures in the economy.
It was also pointed out that the Credit granted to the private sector by commercial banks continues to grow at a high rate.
Although y-o-y growth of broad money (M2b) moderated to 16.5% in May 2016 compared to 18.2% in April 2016, monetary expansion continues at a high rate.
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