Editing Economy of Sri Lanka (section)

== Trade statistics==
{| class="wikitable"
! rowspan=2|Year
!colspan=2|Totals of Merchandise & Services <ref name=KCS2019>{{cite web |title=SRI LANKA'S EXPORT PERFORMANCE 2019|publisher=Export Development Board|url=https://www.srilankabusiness.com/ebooks/export-performance-2019.pdf |access-date=5 May 2021 }}</ref><br><small>(in bn. US$)</small>
|-
!Export revenue
!Imports
|-
| 2016 ||{{Increase}}$13.7||{{Increase}}$19.1
|-
| 2017 ||{{Increase}}$15.0||{{Increase}}$20.9
|-
| 2018  ||{{Increase}}$15.9||{{Increase}}$22.2
|-
| 2019  ||{{Decrease}}$15.8||{{Decrease}}$19.9
|-
| 2020  ||{{Decrease}}$12.8<ref name=KCS2020>{{cite web |title=Sri Lanka achieves USD 15Bn export target for 2021|date=28 January 2022 |publisher=bizenglish.adaderana.lk|url=http://bizenglish.adaderana.lk/sri-lanka-achieves-usd-15bn-export-target-for-2021/ |access-date=7 March 2022 }}</ref>||{{Decrease}}$15.5<ref name="Sri Lanka Export Development Board" />
|-
| 2021  ||{{Increase}}$15.1<ref>{{Cite web|url=http://bizenglish.adaderana.lk/sri-lanka-achieves-usd-15bn-export-target-for-2021/|title = Sri Lanka achieves USD 15Bn export target for 2021|date = 28 January 2022}}</ref>||{{Increase}}$20.6<ref name=":0">{{cite web | url=https://www.cbsl.gov.lk/en/publications/economic-and-financial-reports/annual-economic-review/annual-economic-review-2023/ | title=Annual Economic Review 2023, Key economic indicators,Imports }}</ref>
|-
| 2022  ||{{Decrease}}$14.8<ref>{{Cite web|url=https://www.ft.lk/top-story/2022-exports-top-13-b-mark-but-falls-below-16-b-target/26-744764|title = 2022 exports top $ 13 b mark but falls below $ 16 b target|date = 31 January 2023}}</ref>||{{Decrease}}$18.2
|- 
| 2023  ||||
|-
| 2024  ||{{Increase}}$16.17<ref>{{cite web | url=https://www.adaderana.lk/news.php?nid=105298 | title=Sri Lanka records highest ever export revenue in 2024 }}</ref>||{{Increase}}$18.84<ref>{{cite web | url=https://www.ft.lk/front-page/SL-ends-2024-with-6-b-trade-deficit/44-772591 | title=SL ends 2024 with $ 6 b trade deficit &#124; Daily FT }}</ref>
|}

=== Largest trading partners with Sri Lanka ===
Exports $10.3 billion (2020)<ref>{{Cite web |title=The Atlas of Economic Complexity by @HarvardGrwthLab |url=https://atlas.cid.harvard.edu/explore?country=128&product=undefined&year=2020&productClass=HS&target=Partner&partner=undefined&startYear=undefined |access-date=2022-08-07 |website=atlas.cid.harvard.edu |language=en}}</ref>

Imports $14.9 billion (2020)<ref>{{Cite web |title=The Atlas of Economic Complexity by @HarvardGrwthLab |url=https://atlas.cid.harvard.edu/explore?country=128&product=undefined&year=2020&tradeDirection=import&productClass=HS&target=Partner&partner=undefined&startYear=undefined |access-date=2022-08-07 |website=atlas.cid.harvard.edu |language=en}}</ref>
{| class="wikitable sortable" style="text-align:right;"
!Rank
!Country
!Exports
!Imports
!Total Trade
!Trade Balance
|-
|1
| style="text-align:left;"|{{flagcountry|United States}}
|2,560
|355
|2,915
|2,205
|-
|2
|{{flagcountry|United Kingdom}}
|793
|167
|960
|626
|-
|3
|style="text-align:left;"|{{flagcountry|India}}
|668
|3,220
|3,888
|−2,552
|-
|4
|style="text-align:left;"|{{flagcountry|Germany}}
|651
|269
|978
|382
|-
|5
|style="text-align:left;"|{{flagcountry|Italy}}
|432
|246
|678
|186
|-
|6
|style="text-align:left;"|{{flagcountry|Netherlands}}
|305
|90.9
|395.9
|214.1
|-
|7
|style="text-align:left;"|{{flagcountry|Belgium}}
|285
|37.7
|322.7
|247.3
|-
|8
|style="text-align:left;"|{{flagcountry|China}}
|256
|3,820
|4,076
|−3,564
|-
|9
|style="text-align:left;"|{{flagcountry|Canada}}
|225
|177
|402
|48
|-
|10
|style="text-align:left;"|{{flagcountry|Japan}}
|200
|376
|576
|−176
|}

=== Economy ===<!--Last Updated on 5 Jan 2021-->

=== Sovereign Debt Crisis 2022 ===

After two years of money printing and tax cuts made for fiscal and monetary stimulus, Sri Lanka declared a 'pre-emptive negotiated default' saying most foreign debt would not be repaid from April 12 <ref>{{cite news |title=Sri Lanka halts foreign debt repayments in 'pre-emptive negotiated default', with advance notice being given to creditors. |url=https://economynext.com/sri-lanka-halts-foreign-debt-repayments-in-pre-emptive-negotiated-default-92952/ |access-date=14 April 2022 |publisher=EconomyNext.com |date=12 April 2022}}</ref> Fitch Ratings downgraded Sri Lanka to 'C' from 'CC' and said the country would be further downgraded to restricted default (RD) once the first payment was missed.<ref>{{cite news |title=Fitch downgrades Sri Lanka to 'C', 'RD' after a payment missed |url=https://economynext.com/fitch-downgrades-sri-lanka-to-c-rd-after-a-payment-missed-93008/ |access-date=14 April 2022 |publisher=EconomyNext.com |date=14 April 2022}}</ref> Standard and Poor's downgraded the sovereign rating to 'CC' and said the country would be downgraded to selective default (SD) after a payment was missed.<ref>{{cite news |title=S&P downgrades Sri Lanka to CC, on track for selective default (SD) |url=https://economynext.com/sp-downgrades-sri-lanka-to-cc-on-track-for-selective-default-sd-92995/ |access-date=14 April 2022 |date=14 April 2022}}</ref>

=== GDP growth 2021 and projections for 2022 ===

'''2020: -4, 2021: 4, 2022(f) 3 IMF'''

Sri Lanka's economy could grow 3% in 2022, the International Monetary Fund has said while warning that risk were on the downside and the economy could implode with trade contractions and monetary instability money printing (central bank credit) continued.<ref>{{cite web |title=IMF Executive Board Concludes 2021 Article IV Consultation with Sri Lanka |url=https://www.imf.org/en/News/Articles/2022/03/02/pr2254-sri-lanka-imf-executive-board-concludes-2021-article-iv-consultation-with-sri-lanka |website=imf.org |publisher=International Monetary Fund |access-date=17 April 2022}}</ref><ref>{{cite news |title=Sri Lanka money printing, deficits could lead to economic implosion: IMF report |url=https://economynext.com/sri-lanka-money-printing-deficits-could-lead-to-economic-implosion-imf-report-91152/ |access-date=17 April 2022 |publisher=economynext.com |date=4 March 2022}}</ref> In 2021 Sri Lanka grew 4% amid though excessive central bank financing had led to balance of payments deficits and foreign exchange shortages.<ref>{{cite news |title=Sri Lanka GDP grows 3.7-pct in 2021, fourth quarter 1.8-pct |url=https://economynext.com/sri-lanka-gdp-grows-3-7-pct-in-2021-fourth-quarter-1-8-pct-92225/ |access-date=17 April 2022 |publisher=Economynext.om |date=29 March 2022}}</ref><ref name="2021CBSL">{{cite news |title=Sri Lanka economy managed in 'alternative' way, critics on wrong track: CB Governor |url=https://economynext.com/sri-lanka-economy-managed-in-alternative-way-critics-on-wrong-track-cb-governor-78813/ |access-date=11 April 2021 |publisher=EconomyNext.com |date=12 February 2021}}</ref> Despite progress in managing Coronavirus, external debt remains a challenge amid concerns over money printing under Modern Monetary Theory independent economists had warned earlier.<ref>{{cite news |title=MMT, money printing and Keynes |url=http://www.ft.lk/columns/MMT--money-printing-and-Keynes/4-715798 |access-date=11 April 2021 |publisher=[[DailyFt]] |date=5 April 2021}}</ref> The central bank has said the economy is managed in an alternative way.<ref name="2021CBSL"/> The country's public and publicly guaranteed debt could rise to 115% in 2021 and poverty could worsen, the World Bank has warned.<ref name="WB2021SL">{{cite news |title=Sri Lanka GDP contracts 4-pct in 2020 amid Coronavirus, import substitution |url=https://economynext.com/sri-lanka-gdp-contracts-3-6-pct-in-2020-amid-coronavirus-import-substitution-79834/ |access-date=11 April 2021 |publisher=[[World Bank]] |date=2 April 2021}}</ref>

Sri Lanka's gross domestic product contracted 4% in 2020 due to the government response to the Coronavirus pandemic which was higher than the previous contraction reported in 2001, on top of several years of slow growth and depreciation of the currency. Sri Lanka was making a strong recovery after lockdowns ended in May 2020 but a new outbreak of Coronavirus slowed exports and industry.<ref>{{cite news|url=https://economynext.com/sri-lanka-2020-gdp-to-shrink-3-9-pct-monetary-policy-for-growth-in-2021-cb-governor-77505/|title= Sri Lanka 2020 GDP to shrink 4-pct, monetary policy for growth in 2021: CB Governor|newspaper=[[EconomyNext]]|access-date=5 January 2021}}</ref> The International Monetary Fund initially projected a 4.6-pct contraction for 2020.<ref>{{cite news|url=https://economynext.com/sri-lanka-gdp-growth-negative-4-6-pct-in-2020-bangladesh-among-fastest-to-grow-imf-74903/|title=Sri Lanka GDP growth negative 5-pct in 2020, Bangladesh among fastest to grow: IMF|newspaper=[[EconomyNext]]|access-date=21 November 2020}}</ref>

In the second quarter of 2020, Sri Lanka's GDP was estimated to have contracted by 16% the biggest quarterly fall on record and expanded by 2% in the third quarter. In the first nine months of the year, GDP was estimated to have contracted 5%.<ref>{{cite news|url=https://economynext.com/sri-lanka-2020-gdp-shrinks-16-3-pct-in-2q-in-covid-19-hit-grows-1-5-pct-in-3q-76931/|title=Sri Lanka 2020 GDP shrinks 16-pct in 2Q in Covid-19 hit, grows 2-pct in 3Q|newspaper=[[EconomyNext]]|access-date=16 December 2020}}</ref>

After growing 5.0% in 2015, growth fell to 4% in 2016, 4% in 2017, 3% in 2018 and 2% in 2019.<ref>{{cite web |url=https://www.cbsl.gov.lk/en/statistics/statistical-tables/real-sector/national-accounts |title= National Accounts - Gross Domestic Product |publisher=[[Central Bank of Sri Lanka]] |website=cbsl.gov.lk |access-date=3 December 2020}}</ref>

The economy suffered a series of shocks in the form of a currency crisis which brought an International Monetary Fund program in 2016, political instability in 2018 combined with a second currency crisis and suicide bombings by an Islamist extremist group on Easter Sunday 2019.<ref>{{cite news|url=https://www.reuters.com/article/us-imf-sri-lanka-idUSKCN0XQ063|title=IMF agrees $1.5 billion bailout for Sri Lanka to avert balance of payments crisis |newspaper=[[Reuters]]|access-date=3 December 2020}}</ref><ref>{{cite news|url=https://www.bloomberg.com/news/articles/2019-04-21/police-say-multiple-explosions-in-sri-lanka-s-capital-colombo|title=Sri Lanka Imposes Curfew After Easter Sunday Bombings Kill 207 |newspaper=[[Bloomberg News|Bloomberg]]|access-date=3 December 2020}}</ref>

===Fiscal Developments===

'''Budget deficit 2019: -6.8%/9.4%, 2020:11.1%/14%, 2021f: -9.4%'''

Sri Lanka is expecting a budget deficit of 9.4% of GDP in 2021 after the nominal output for the year was revised down following a Coronavirus pandemic in 2020.<ref name="CBSL20-chap1">{{cite web |title=CBSL Annual Report Chapter 01 |url=https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2020/en/5_Chapter_01.pdf |publisher=Central Bank of Sri Lanka |access-date=29 May 2021}}</ref>  A budget submitted to parliament originally expected a deficit of 8.9% in 2021 with a Coronavirus pandemic slowing growth, compounded by tax cuts.<ref>{{cite news|url=https://economynext.com/sri-lanka-2021-budget-deficit-targeted-at-8-9-pct-of-gdp-76083/|title=Sri Lanka 2021 budget deficit targeted at 8.9-pct of GDP|newspaper=[[EconomyNext]]|access-date=9 January 2021}}</ref> Concerns were raised that the targets were too ambitious given Coronavirus pandemic uncertainties as well as global economic weakness with Fitch Ratings projecting a deficit of 11.5%.<ref>{{cite web |url=https://www.fitchratings.com/research/sovereigns/fitch-downgrades-sri-lanka-to-ccc-27-11-2020 |title= Fitch Downgrades Sri Lanka to 'CCC' |publisher=[[Fitch Ratings]] |website=fitchratings.com |access-date=9 January 2021}}</ref>

The Finance Ministry has countered saying a lower interest bill, a gradual recovery in 2021, and stronger foreign direct investments to the Port City will strengthen economic activity and state finances. The Treasury also hopes to borrow more domestically instead of from abroad.<ref>{{cite web |url=https://www.treasury.gov.lk/news/article/27112020 |title=Rating Action by Fitch Ratings based on Uncorroborated Facts sans due Consideration Given to Recent Economic and Policy Developments. |publisher=[[Ministry of Finance]] |website=treasury.gov.lk |access-date=9 December 2020 |archive-date=4 December 2020 |archive-url=https://web.archive.org/web/20201204065142/https://www.treasury.gov.lk/news/article/27112020 |url-status=dead }}</ref>

Sri Lanka's national debt has been gradually rising amid weak growth and policy gridlock. Following the steep rise in the deficit in 2020, central government debt rose to 101% of GDP.<ref name="CBSL20-chap1"/> The debt to GDP ratio rose to 86.8% in 2019 from 77.9% in 2017.<ref name="fiscalCB">{{cite web |url=https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2019/en/10_Chapter_06.pdf |title= CBSL 2019 Annual Report - Fiscal Policy and Government Finance |publisher=[[Central Bank of Sri Lanka]] |website=cbsl.gov.lk |access-date=30 December 2020}}</ref>

'''Budget deficit data controversy'''

Sri Lanka's Ministry of Finance in 2020 changed its cash-basis accounting convention and charged some payment arrears to the previous year, reporting an 11.1% of GDP deficit for 2020 and revising up the 6.8 deficit in 2019 to 9.6%.<ref name="CBSL20-chap1"/> Sri Lanka's main opposition charged that it was accounting fraud since arrears are always charged to the year it was paid under the country's cash-basis accounting convention. The deficit that was financed in 2020 was 14.0% of GDP.<ref>{{cite news |title=Fiscal deficit 14% in 2020: Harsha |url=https://www.ft.lk/front-page/Fiscal-deficit-14-in-2020-Harsha/44-717280 |access-date=29 May 2021 |publisher=FT.lk |date=4 May 2021}}</ref> A Sri Lanka-based fact-checking portal, FactCheck.lk said the shift in numbers to 2019 "cannot be validated by an accounting standard."<ref>{{cite web |title=MP Harsha de Silva highlights national accounting fraud |url=http://factcheck.lk/claim/harsha-de-silva-6 |website=Factcheck.lk |publisher=Fact Check |access-date=29 May 2021 |archive-date=2 June 2021 |archive-url=https://web.archive.org/web/20210602212522/http://factcheck.lk/claim/harsha-de-silva-6 |url-status=dead }}</ref>

'''Credit rating and commercial borrowing'''

Sri Lanka applied for credit ratings from international agencies in its efforts to apply for loans from international markets in 2005 after the election of Mahinda Rajapakse as president. Standard and Poor's gave Sri Lanka a "B+" speculative rating, four levels below investment grade and Fitch "BB−", three grades below investment grade. Standard and Poor's maintained Sri Lanka was constrained by providing widespread subsidies, a bloated public sector, transfers to loss-making state enterprises, and high interest local and international burdens [https://web.archive.org/web/20070927004240/http://www.lankabusinessonline.com/fullstory.php?newsID=1370696445&no_view=1&SEARCH_TERM=1]. Standard and Poor's estimates public sector debt has reached 95% of GDP [https://web.archive.org/web/20070927004240/http://www.lankabusinessonline.com/fullstory.php?newsID=1370696445&no_view=1&SEARCH_TERM=1], in comparison to CIA estimates of 89% of GDP [https://www.cia.gov/the-world-factbook/countries/sri-lanka/]. Sri Lanka in mid-2007 sought to borrow $500 million from international markets to shore up the deteriorating exchange rate and reduce pressure on repayment of the domestic debt market [https://web.archive.org/web/20070927004240/http://www.lankabusinessonline.com/fullstory.php?newsID=1370696445&no_view=1&SEARCH_TERM=1]. The head of the opposition UNP, Ranil Wickremasinghe has warned that such intense borrowing is unsustainable and will not repay these loans if elected to power [http://www.sundaytimes.lk/070819/News/nws13.html].
Sri Lanka's credit rating was progressively downgraded following a series of currency crises and output shocks. In December 2018 Fitch downgraded Sri Lanka to 'B' <ref>{{cite web |url=https://www.fitchratings.com/research/sovereigns/fitch-downgrades-sri-lanka-to-b-outlook-stable-03-12-2018 |title= Fitch Ratings Commentary |publisher=[[Fitch Ratings]] |website=fitchratings.com |access-date=28 November 2020}}</ref> and in April 2020 to 'B−' amid a global Coronavirus pandemic.<ref>{{cite web |title=Fitch downgrades Sri Lanka to B- |url=https://www.fitchratings.com/research/sovereigns/fitch-downgrades-sri-lanka-to-b-outlook-negative-24-04-2020 |website=fitchratings.com |publisher=Fitch Ratings |access-date=17 April 2022}}</ref>
Moody's downgraded Sri Lanka to Caa1 in September 2020,<ref name="MoodysCaa1">{{cite news|url=https://economynext.com/sri-lanka-sovereign-rating-downgraded-two-notches-to-caa1-by-moodys-74239/|title=Sri Lanka sovereign rating downgraded two notches to Caa1 by Moody's|newspaper=[[EconomyNext]]|access-date=28 November 2020}}</ref> which was disputed by the Finance Ministry.<ref>{{cite news|url=https://island.lk/moodys-downgrade-unwarranted-erroneous-suggesting-reckless-reaction/|title=Moody's downgrade 'unwarranted, erroneous suggesting reckless reaction'|newspaper=[[The Island (Sri Lanka)|The Island]]|access-date=28 November 2020}}</ref> In November 2020, Fitch Ratings also downgraded Sri Lanka to CCC citing fiscal and external concerns.<ref name="FitchCCC">{{cite web |url=https://www.fitchratings.com/research/sovereigns/fitch-downgrades-sri-lanka-to-ccc-27-11-2020|title= Fitch Ratings Commentary |publisher=[[Fitch Ratings]] |website=fitchratings.com |access-date=28 November 2020}}</ref> In December 2020, Standard and Poor's followed, downgrading to 'CCC+', citing high fiscal deficits and excessive domestic liquidity, which was also protested by the Finance Ministry.<ref>{{cite news|url=https://economynext.com/sri-lanka-says-sp-downgrade-to-ccc-ignores-policy-framework-76810/|title= Sri Lanka says S&P downgrade to 'CCC' ignores policy framework|newspaper=[[EconomyNext.com]]|access-date=13 December 2020}}</ref>

'''Investments'''

Sri Lanka's investment-to-GDP ratio is around 31%, made up of about 24% private and 5% public investment. The private savings rate is about 24% and the government is a net dis-saver leaving a domestic savings investment gap of around 7% of GDP. In 2019 investment fell to 27.4% of GDP from 30.4% a year earlier with the domestic savings rate also falling to 21.3% of GDP from 23%.<ref name="savingsCB">{{cite web |url=https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/publications/annual_report/2019/en/6_Chapter_02.pdf |title= CBSL 2019 Annual Report - National Output Income and Expenditure |publisher=[[Central Bank of Sri Lanka]] |website=cbsl.gov.lk |access-date=9 January 2021}}</ref> Sri Lanka's savings rate is undermined by government dis-saving (the revenue deficit), which rose from 1.2 to 2.7% in 2019.<ref name="fiscalCB"/>

There are attempts to improve Sri Lanka's "Ease of Doing Business index' (Sri Lanka stood at 111 for 2018 down from 85th in 2014) and the overall tariff structure. In 1992, Sri Lanka's exports were on par with countries like Vietnam and Bangladesh (at US$2bn), which has only grown to US$12bn by the end of 2017 compared to Vietnam's US$214bn and Bangladesh's US$36bn for 2017.

=== Inflation in 2021 ===

'''Colombo Consumer price inflation 2020 : 4.2% April 2021 : 3.9%'''

Inflation in Sri Lanka measured by the Colombo Consumer Price Index grew 6.0% in the 12-months to August 2021 picking up from 5.7 percent in July.<ref>{{cite news |title=Sri Lanka inflation at 3.9-pct in April 2021 |url=https://economynext.com/sri-lanka-inflation-rises-to-6-0-pct-in-august-2021-85647/ |access-date=9 September 2021 |publisher=EconomyNext |date=1 September 2021}}</ref> Inflation was 4.2% in the year to December 2020. In 2019 inflation was 4.8 percent.<ref>{{cite news|url=https://economynext.com/sri-lanka-inflation-reaches-4-2-pct-in-2020-december-77434/|title=Sri Lanka inflation reaches 4.2-pct in 2020 December|newspaper=[[EconomyNext]]|access-date=2 January 2021}}</ref>

The Department of Census Statistics also compiles a National Consumer Price Index which is released with a delay. Inflation measured by the NCPI increased to 6.8% in July 2021 from 6.1% in June 2021, higher than the central bank's target rate<ref>{{cite news |title=Sri Lanka's national inflation rises to 6.8 percent in July 2021 |url=http://www.colombopage.com/archive_21B/Aug23_1629734971CH.php |access-date=10 September 2021 |publisher=ColomboPage.com |date=23 August 2021}}</ref>

Sri Lanka's central bank is targeting inflation at 4-6 per cent in 2021, though the policy will be loose to promote growth. "The Central Bank is of the view that continued support through monetary and fiscal interventions is essential to provide adequate impetus to the economy amidst the challenging domestic and global macroeconomic conditions," Governor W D Lakshman said in January 2021. "Therefore, the Central Bank will continue the prevailing accommodative monetary policy stance in 2021 to ensure the envisaged recovery of economic activity. The Central Bank will continue to remain vigilant but is confident that inflation will remain within the targeted range of 4-6 per cent over the medium-term.<ref>{{cite news |title=Sri Lanka 2020 GDP to shrink 3.9-pct, monetary policy for growth in 2021: CB Governor |url=https://economynext.com/sri-lanka-2020-gdp-to-shrink-3-9-pct-monetary-policy-for-growth-in-2021-cb-governor-77505/ |access-date=10 September 2021 |publisher=Economynext.com |date=4 January 2021}}</ref> But after worsening balance of payments trouble and inflation, rates were hiked in August and the statutory reserve ratio was also raised.<ref>{{cite news |title=Sri Lanka central bank raises overnight policy rate 50bp, SRR 200bp as forex reserves run low |url=https://economynext.com/sri-lanka-central-bank-raises-overnight-policy-rate-50bp-srr-200bp-as-forex-reserves-run-low-85171/ |access-date=10 September 2021 |date=9 August 2021}}</ref>

Sri Lanka used a 'flexible inflation targeting' framework for monetary policy at least until 2019. In 2020 growth took a priority, Governor Lakshman has said as efforts are made to boost output amid a COVID-19 pandemic.<ref>{{cite news|url=https://economynext.com/sri-lanka-policy-to-target-growth-with-inflation-well-behaved-cb-governor-76322/|title= Sri Lanka policy to target growth with inflation 'well-behaved': CB Governor|newspaper=[[EconomyNext.com]]|access-date=3 December 2020}}</ref> Sri Lanka suffered a US$3.2bn balance of payments deficit in 2020 amid monetary easing.<ref>{{cite web |title=External Sector Performance - December 2020 |url=https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20210212_external_sector_performance_2020_december_e.pdf |website=www.cbsl.gov.lk |publisher=Central Bank of Sri Lanka |access-date=9 March 2021}}</ref>

=== Interest rates – 1 year T bill market rate by June 2019 ===
====12 Month T bill to be at 10% by 30 June 2019====

The CBSL has reduced its T bill holding significantly from April 2017 to date reversing any monetary stimulated inflationary actions. Thus the resultant liquidity levels in the money market broadly reflect natural market conditions compared to the market that was there a year ago, which reflected more realistic banking sector interest rates as of June 2018. Private sector credit growth declined from high levels of 29% YoY in July 2016 to 15% YoY levels in 1Q2018.

Given the changes taking place in the private credit space (i.e. the retail tilt), and provided the CBSL's recent policy rate cut in April 2018, credit growth may still continue to move either horizontally (i.e. at a 15% level) or continue to reduce slightly given anticipated near term inflationary pressures, as the consumption-led borrowings may also tend to decline on account of the anticipated reduction in near term disposable income. This will however not add any excessive upward pressures on interest rates (including 12-month T bill yields), especially during 2H2018E. As a result, 12-month Treasury bill yields may slightly decline from its June 2018 --> 9.4% to 9% levels by the end of 2018E. However, given the International Sovereign Bond (ISB) bullet payments >US$3bn p.a. commencing from 2019E may likely add some upward pressure on interest rates, resulting in the 12-month T bill yields rising to at least 10% by 30 June 2019.<!-- The author of this segment (Sanjeewa Fernando) is a Lecturer at the University of Colombo for Master of Financial Economics -->