EXECUTIVE SUMMARY Context. Sri Lanka’s economy has navigated recent market turbulence relatively well. Growth has remained solid, inflation is in mid-single digits, and the current account deficit has narrowed. From mid-May, the exchange rate came under pressure as market expectations of U.S....

EXECUTIVE SUMMARY Sri Lanka’s 2009 Stand-By Arrangement was initiated at the onset of the global financial crisis. It also coincided with the ending of the country’s decades-old civil conflict. This unusual combination of circumstances made the program subject to very high economic...

KEY ISSUES Context. Macroeconomic performance has generally exceeded expectations. Real GDP grew 7.3 percent for 2013, up from 6.3 percent in 2012. Inflation declined to below 5 percent, and the external current account balance has improved. Private credit growth has been slow, however, a number...

EXECUTIVE SUMMARY The first chapter on monetary policy transmission examines the channels through which innovations to policy variables-policy rate or monetary aggregates-affect such macroeconomic variables as output and inflation in Sri Lanka. The effectiveness of monetary policy instruments is...

This paper discusses a request from the Sri Lankan authorities for a Stand-By Arrangement (SBA). The proposed SBA (of 400 percent of quota or SDR1.65 billion) would aim to smooth adjustment to the external shock that has hit the country, restore health to the country’s public finances, allow...

Economic conditions are improving in Sri Lanka, and are likely to show strong growth. The current account remains strong, and tourism arrivals are rapidly improving. Monetary conditions are stable, and the central bank's policy stance is appropriate. Reforming the board of investment will...