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CENTRAL BANK OF SRI LANKA

ANNUAL REPORT

OF THE MONETARY BOARD TO THEHON. MINISTER OF FINANCE

FOR THE YEAR

2012

ISBN 978-955-575-260-2

ISSN 1391-359X

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Central Bank of Sri Lanka, 30, Janadhipathi Mawatha, Colombo, 00100.

Ajith Nivard CabraalThe Governor

Central Bank of Sri Lanka30, Janadhipathi Mawatha

Colombo 01, Sri Lanka.

March 28, 2013

His Excellency Mahinda RajapaksaPresident of Sri Lanka andMinister of Finance and PlanningPresidential SecretariatColombo 01.

Your Excellency,

Annual Report 2012

Section 35 of the Monetary Law Act (Chapter 422) requires the Monetary Board of the Central Bank of Sri Lanka to submit an Annual Report to the Minister of Finance on the state of the economy, the condition of the Central Bank and a review of the policies and measures adopted by the Monetary Board, within four months after the end of each financial year.

The Sixty Third Annual Report of the Monetary Board of the Central Bank, in respect of the year 2012, is submitted herewith in fulfilment of this obligation.

Yours sincerely,

CENTRAL BANK OF SRI LANKA

THE MONETARY BOARD(As at 31 December 2012)

AJITH NIVARD CABRAALGovernor

P. B. JAYASUNDERASecretary to the Ministry of Finance and Planning

MRS. M. RAMANATHANAppointed Member

NIMAL WELGAMAAppointed Member

N. A. UMAGILIYAAppointed Member

PRINCIPAL OFFICERS AS AT 31 December 2012

Deputy Governors

B. D. W. ANANDA SILVA P. NANDALAL WEERASINGHE

MRS. CHANDRA PREMARATNE

Assistant Governors

P. SAMARASIRI (Secretary to the Monetary Board)

W. M. KARUNARATNE

MRS. J. P. MAMPITIYA

W. M. HEMACHANDRA

S. LANKATHILAKE

C. J. P. SIRIWARDENA

MRS. R. DHEERASINGHE

A. KAMALASIRI

K. D. RANASINGHE (On Release)

S. S. RATNAYAKE

DEPARTMENTAL HEADSBank Supervision DepartmentMRS. T. M. J. Y. P. FERNANDO - DirectorS. K. RANASINGHE - Additional Director

Centre for Banking StudiesC. P. A. KARUNATILAKE - DirectorT. D. H. KARUNARATNE - Additional Director

Communications DepartmentS. J. A. HANDAGAMA - Director

Currency DepartmentJ. P. R. KARUNARATNE - SuperintendentMRS. H. P. T. WIJESURIYA - Additional SuperintendentMISS. S. H. GUNAWARDENA - Additional Superintendent

Domestic Operations DepartmentR. A. A. JAYALATH - DirectorD. A. G. K. WIJETUNGA - Additional Director

Economic Research DepartmentMRS. S. GUNARATNE - DirectorMRS. Y. M. INDRARATNE - Additional DirectorD. KUMARATUNGE - Additional Director

Employees’ Provident Fund DepartmentMRS. K. GUNATILAKE - SuperintendentMRS. C. M. D. N. K. SENEVIRATNE - Additional SuperintendentL. D. D. Y. PERERA - Additional Superintendent

Exchange Control DepartmentP. H. O. CHANDRAWANSA - ControllerR. R. JAYARATNE - Additional Controller

Finance Department M. I. SUFIYAN - Chief AccountantP. V. L. NANDASIRI - Additional Chief Accountant

Financial Intelligence UnitD. M. RUPASINGHE - DirectorD. K. WIJESURIYA - Additional Director

Financial Stability Studies Department MRS. K. M. A. N. DAULAGALA - DirectorH. P. G. S. RATNASIRI - Additional Director

Governor’s Secretariat DepartmentMRS. K. DASSANAYAKE - Director T. M. Z. MUTALIPH - Additional Director

Human Resources DepartmentA. R. K. WIJESEKERA - DirectorW. R. A. DHARMARATNE - Additional Director

Information Technology DepartmentMRS. R. A. S. M. DAYARATNE - DirectorC. B. PATHBERIYA - Additional Director

International Operations DepartmentH. A. KARUNARATNE - DirectorA. A. M. THASSIM - Additional DirectorC. N. WIJAYASEKERA - Additional Director

Management Audit DepartmentA. M. N. GUNAWARDANA - Director

Payments and Settlements DepartmentMRS. R. B. WEERASINGHE - DirectorA. J. L. PEIRIS - Additional Director

Policy Review and Monitoring DepartmentP. W. D. N. R. RODRIGO - DirectorV. BASKARAN - Additional Director

Facilities Management DepartmentU. H. E. SILVA - DirectorH. SRIYARATNE - Additional Director

Provincial Offices Monitoring DepartmentH. AMARATHUNGA - Director

Public Debt DepartmentN. W. G. R. D. NANAYAKKARA - Superintendent and RegistrarMRS. U. L. MUTHUGALA - Additional Superintendent

Regional Development DepartmentM. J. S. ABEYSINGHE - DirectorM. S. K. DHARMAWARDANE - Additional DirectorA. M. R. K. ATTANAYAKE - Additional Director

Secretariat DepartmentD. WASANTHA - SecretaryB. W. JINASENA - Additional Secretary

Security Services DepartmentS. WANIGASEKERA - DirectorB. L. J. S. BALASOORIYA - Additional Director (On Study Leave)

Statistics DepartmentMISS. K. SARAVANAMUTTU - DirectorT. H. B. SARATHCHANDRA - Additional Director

Supervision of Non-Bank Financial Institutions DepartmentH. M. EKANAYAKE - DirectorH. B. D. KARUNARATNA - Additional DirectorMRS. N. H. E. R. SIRIWARDHANA - Additional Director

Welfare DepartmentE. A. HETTIARACHCHI - DirectorT. W. ARIYARATNE - Additional Director

AUDITOR

H. A. S. SAMARAWEERAAuditor-General

CONTENTS

PART I

Page

1. ECONOMIC, PRICE AND FINANCIAL SYSTEM STABILITY, OUTLOOK AND POLICIES

1.1 Overview … … … … 1 1.2 Macroeconomic Developments, Stability and Policy Responses in 2012 … … … 7 Real Sector Developments ... … … … 7 External Sector Developments ... … … … 13 Fiscal Sector Developments ... … … … 17 Monetary Sector Developments ... … … … 19 Financial Sector Developments ... … … … 211.3 Global Economic Environment and Outlook … … … … 231.4 Medium Term Macroeconomic Outlook … … … … 26

2. NATIONAL OUTPUT AND EXPENDITURE

2.1 Overview … … … … 37 2.2 Sectoral Output, Policies, Institutional Support and Issues … … … … 38 Agriculture … … … … 38 Export Agriculture … … … … 40 Domestic Agriculture … … … … 42 Fishing … … … … 44 Livestock … … … … 45 Forestry … … … … 46 Agricultural Policies and Institutional Support … … … … 46 Industry … … … … 49 Mining and Quarrying … … … … 49 Manufacturing … … … … 50 Processing … … … … 50 Factory Industry … … … … 50 Industry Policies and Institutional Support … … … 53 Cottage Industry … … … … 57 Electricity, Gas and Water … … … … 57 Construction … … … … 57 Services … … … … 58 Wholesale and Retail Trade … … … … 58 Hotels and Restaurants … … … … 59 Transport and Communication … … … … 59 Banking, Insurance and Real Estate … … … … 60 Government Services … … … … 61 Private Services … … … … 61 2.3 Expenditure … … … … 61 Consumption … … … … 61 Investment … … … … 63 Availability and Utilisation of Resources … … … … 65 Savings … … … … 66

3. ECONOMIC AND SOCIAL INFRASTRUCTURE

3.1 Overview … … … … 673.2 Economic Infrastructure Policies, Institutional Framework and Performance … … … 69 Communication Services … … … … 69 Energy … … … … 73 Electricity … … … … 74 Petroleum … … … … 76 Oil Exploration ... ... ... … 78 Transportation … … … … 79

Page

Road Development ... … … … 79

Road Passenger Transportation ... ... ... … 80

Railway Transportation … … … … 81

Civil Aviation … … … … 83 Port Services ... … … … 84 Water Supply and Irrigation … … … … 853.3 Social Infrastructure Policies, Institutional Framework and Performance … … … 87 Health … … … … 87 Education … … … … 89 Housing and Urban Development … … … … 91 Safety Nets and Poverty Alleviation … … … … 92 Environment … … … … 93 4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Overview ... … … … 974.2 Prices … … … … 98 Price Movements and Contributory Factors … … … … 98 Colombo Consumers’ Price Index (CCPI) … … … … 98 Wholesale Prices Index (WPI) … … … … 102 GDP Deflator … … … … 1034.3 Wages … … … … 103 Public Sector Wages … … … … 104 Formal Private Sector Wages … … … … 104 Informal Private Sector Wages … … … … 1054.4 Population, Labour Force and Employment … … … … 106 Population … … … … 106 Labour Force … … … … 107 Employment … … … … 110 Unemployment … … … … 111 Foreign Employment … … … … 112 Labour Productivity … … … … 113 Labour Relations … … … … 116 Labour Market Reforms … … … … 117

5. EXTERNAL SECTOR DEVELOPMENTS AND POLICIES

5.1 Overview … … … … 1195.2 External Trade Policies and Institutional Support … … … … 1225.3 Trade in Goods, Trade Balance, Terms of Trade and Direction of Trade … … … 124 Export Performance … … … … 124 Import Performance … … … … 126 Trade Balance … … … … 129 Terms of Trade … … … … 129 Direction of Trade … … … … 1305.4 Trade in Services, Income, Current Transfers and Current Account Balance … … 131 Trade in Services … … … … 131 Transportation Services … … … … 131 Travel and Tourism … … … … 132 Communication and Computer and Information Services … … … 134 Inflows and Outflows of Income … … … … 135 Current Transfers … … … … 135 Current Account Balance … … … … 1365.5 Capital and Financial Flows and Balance of Payments … … … … 136 Foreign Direct Investment … … … … 136 Medium and Long-term Capital Flows to the Government … … … … 137 Investment in Government Securities … … … … 137 Long-term Capital Flows to the Private Sector and State-Owned Enterprises … … 138 Short-term Capital to the Private Sector and Public Corporations … … … 138 Commercial Banks … … … … 138 Balance of Payments … … … … 138 International Reserves … … … … 139

6 Sovereign Ratings, External Debt and Debt Servicing … … … … 140

Sovereign Ratings … … … … 140 External Debt … … … … 143 Foreign Debt Service Payments … … … … 1445.7 Exchange Rate Policy and Exchange Rate Movements … … … … 145 Nominal and Real Effective Exchange Rates … … … … 146 Developments in the Domestic Foreign Exchange Markets … … … … 147

6. FISCAL POLICY AND GOVERNMENT FINANCE

6.1 Overview … … … … 1496.2 Fiscal Policy Direction and Measures … … … … 1506.3 Government Budgetary Operations … … … … 154 Revenue and Grants … … … … 154 Revenue … … … … 154 Grants … … … … 157 Expenditure and Net Lending … … … … 157 Financing the Budget Deficit … … … … 1616.4 Government Debt and Debt Service Payments … … … … 163 Government Debt … … … … 163 Debt Service Payments … … … … 1666.5 Budgetary Operations in Sub National Governments ... … … … 167 Policy Direction and Measures of Sub National Governments … … … 167 Budgetary Operations in Provincial Councils … … … … 168 Consolidated General Government Budgetary Operations … … … … 169

7. MONETARY POLICY, MONEY, CREDIT AND INTEREST RATES

7.1 Overview … … … … 171 7.2 Monetary Policy … … … … 1727.3 Developments in Money and Credit … … … … 174 Money Market Liquidity … … … … 174 Reserve Money … … … … 175 Narrow Money (M1) … … … … 177 Broad Money (M2b) … … … … 177 Broad Money (M4) … … … … 1817.4 Interest Rates … … … … 182 Money Market Rates … … … … 182 Deposit and Lending Rates … … … … 183 Yield Rates on Government Securities … … … … 185 Yield Rates on Corporate Debt Securities … … … … 1857.5 Future Developments, Challenges and Outlook … … … … 186

8. FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

8.1 Overview … … … … 187 8.2 Performance of Financial Institutions … … … … 189 Banking Sector … … … … 189 Business Expansion … … … … 189 Assets and Liabilities … … … … 189 Risk Management … … … … 190 Resources … … … … 195

Non-Bank Financial Institutions Sector … … … … 196 Business Expansion … … … … 197 Assets and Liabilities … … … … 197 Risk Management … … … … 198 Resources … … … … 199 Primary Dealers in Government Securities … … … … 202 Risk Management … … … … 202 Market Participation … … … … 203 Unit Trusts … … … … 203 Insurance Companies … … … … 204

Page

Superannution Funds … … … … 2068.3 Performance of Financial Markets … … … … 207 Money Market … … … … 207 Domestic Foreign Exchange Market … … … … 208 Government Securities Market … … … … 208 Corporate Debt Securities Market … … … … 209 Commercial Paper … … … … 209 Corporate Bonds … … … … 210 Equity Market … … … … 2108.4 Development Finance and Access to Finance … … … … 2128.5 Financial Infrastructure Payment and Settlement Systems … … … … 213 Credit Information … … … … 217

PART II

ACCOUNTS AND OPERATIONS OF THE CENTRAL BANK OF SRI LANKA 1-94

PART III

MAJOR ADMINISTRATIVE MEASURES ADOPTED BY THE MONETARY BOARD IN 2012 1-92

PART IV

MAJOR LEGISLATIVE ENACTMENTS OF 2012 RELATING TO THE FUNCTIONS ANDOPERATIONS OF THE CENTRAL BANK AND BANKING INSTITUTIONS IN SRI LANKA 1-32

STATISTICAL APPENDIX

SPECIAL STATISTICAL APPENDIX

PART I – TABLES

Page


1.1 Gross National Product by Industrial Origin at Constant (2002) Prices … … … 8

1.2 Aggregate Demand and Savings Investment Gap … … … … 10

1.3 External Sector Developments … … … … 14

1.4 Global Economic Developments and Outlook … … … … 24

1.5 Medium-term Macroeconomic Framework ... … … … 27


2.1 Sectoral Composition and Increase in Gross Domestic Product

by Industrial Origin at Constant (2002) Prices … … … … 38

2.2 Agriculture Production Index (2007-2010=100) … … … … 40

2.3 Trends in Principal Agricultural Crops … … … … 41

2.4 Paddy Sector Statistics … … … … 43

2.5 Fish Production … … … … 45

2.6 Livestock Sector Statistics … … … … 45

2.7 Industrial Production Index (IPI) … … … … 50

2.8 Aggregate Demand … … … … 62

2.9 Composition of Private Consumption Expenditure at Current Market Prices … … … 63

2.10 Investment and Employment in Enterprises Registered under Board of

Investment of Sri Lanka (BOI) and Ministry of Industry and Commerce (MIC) … … ... 64

2.11 Total Resources and Their Uses at Current Market Prices ... … … 65

2.12 Consumption, Investment and Savings at Current Market Prices … … ... … 66


3.1 Government Investment in Infrastructure … .... … … 68

3.2 Growth of Telecommunications and Postal Services ... … … … 69

3.3 Power Sector Performance … ... … … 74

3.4 Petroleum Sector Performance … ... … … 77

3.5 Salient Features of the Transport Sector … ... … … 82

3.6 Performance of Port Services … ... … … 84

3.7 Water Supply by National Water Supply and Drainage Board … … … … 86

3.8 Salient Features of Health Services … ... … … 88

3.9 Salient Features of General and University Education . ... … … … 90

3.10 Samurdhi Welfare Programme - Number of Beneficiary Families

and Value of Grants … ... … … 93

4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Changes in Price Indices … ... … … 99

4.2 Retail Prices of Key Imported and Domestically Produced Items … … … … 100

4.3 Revisions to Key Items with Administered Prices 2010-2012 … ... … … 101

4.4 Sectoral Deflators and GDP Deflator … ... … … 103

4.5 Wage Rate Indices … ... … … 104

4.6 Informal Private Sector Daily Wages by Sector and Gender ... … … … 105

4.7 District-wise Population and Density … ... … … 106

4.8 Household Population, Labour Force and Labour Force Participation … … … 107

4.9 Employment by Economic Activity … ... … … 110

10 Status of Employment … ... … … 110

4.11 Public Sector Employment … ... … … 111

4.12 Unemployment Rate (Unemployed as a percentage of Labour Force) … … … 111

4.13 Departures for Foreign Employment … ... … … 112

4.14 Foreign Employment Departures by Destination … ... … … 113

4.15 Labour Productivity by Major Economic Sector … ... … … 115

4.16 Strikes in Private Sector Industries … ... … … 116


5.1 Balance of Payments Analytical Presentation … … … … 121

5.2 Composition of Exports … … … … 125

5.3 Composition of Imports … … … … 127

5.4 Volume of Major Imports … … … … 128

5.5 Trade Indices … … … … 129

5.6 Net Services, Income and Current Transfers … … … … 132

5.7 Tourism Performance … … … … 133

5.8 Major Projects Financed with Foreign Borrowings during 2012 … … … … 137

5.9 International Reserves of Sri Lanka … … … … 139

5.10 Disbursement Details of the IMF-SBA Facility 2009 … … … … 140

5.11 Sri Lanka’s Sovereign Credit Rating and Country Outlook … … … … 140

5.12 Outstanding External Debt and Banking Sector External Liabilities … … … 144

5.13 External Debt Service Payments … … … … 145

5.14 Exchange Rate Movements … … … … 146


6.1 Summary of Government Fiscal Operations … … … … 151

6.2 Economic Classification of Revenue … … … … 155

6.3 Economic Classification of Expenditure and Lending Minus Repayments … … … 158

6.4 Functional Classification of Expenditure … … … … 160

6.5 Sources of Domestic Financing … … … … 162

6.6 Outstanding Government Debt (as at end year) … … … … 164

6.7 Assessment of External Debt Vulnerability of Sri Lanka - 2012 … … … … 165

6.8 Government Debt Service Payments … … … … 166

6.9 Government Debt Indicators … … … … 167

6.10 Budget Outturn for Provincial Councils … … … … 168


7.1 Recent Monetary Policy Measures 2010-2012 … … … … 1737.2 Developments in Monetary Aggregates … … … … 1767.3 Sources of Reserve Money and Broad Money (M2b) … … … … 1777.4 Classification of Loans and Advances granted by Commercial Banks … … … 1797.5 Maturity Analysis of Outstanding Credit to the Private Sector by Commercial Banks … … 1807.6 Sources of Broad Money (M4) … … … … 1817.7 Selected Money Market Rates … … … … 1837.8 Deposit and Lending Rates … … … … 184 7.9 Yield Rates on Government Securities … … … … 185


8.1 Total Assets of the Major Financial Institutions … … ... … 188

8.2 Distribution of Banks and Bank Branches ... … ... … 189

8.3 Composition of Assets and Liabilities of the Banking Sector ... … ... … 190

4 Composition of Statutory Liquid Assets of the Banking Sector … ... … … 194

8.5 Profit of the Banking Sector … ... … … 195

8.6 Composition of Regulatory Capital of the Banking Sector … … … ... 195

8.7 Distribution of Branches of NBFIs by Province … … … … 197

8.8 Composition of Assets and Liabilities of the NBFI Sector … … … ... 198

8.9 Composition of Income and Expences of the NBFI Sector … … ... ... 199

8.10 Composition of Regulatory Capital of the NBFI Sector … … … ... 199

8.11 Performance of Primary Dealers … … … ... 202

8.12 Performance of the Unit Trust Sector … … ... … 203

8.13 Performance of the Insurance Sector … … … ... 204

8.14 Performance of EPF and ETF ... … ... … 206

8.15 Money Market Transactions ... … ... … 207

8.16 Market Yield Rates of Government Security ... … ... … 209

8.17 Performance of the Share Market ... … ... … 210

8.18 Transactions through Payment Systems ... … ... … 214

PART I – CHARTS

Page


1.1 Annual Real GDP Growth Rate (1978-2012) … … … ... 2

1.2 Year-on-year Inflation (Based on CCPI, Spliced) … … … ... 2

1.3 Annual Unemployment Rate (1990-2012) … … … ... 7

1.4 Savings and Investment (as a Percentage of GDP) … … … ... 10

1.5 Year-on-year Inflation (Based on CCPI: 2006/07=100) … … … ... 11

1.6 Balance of Payments … … … ... 13

1.7 Revenue, Expenditure and Overall Fiscal Deficit (as a percentage of GDP) … … ... 17

1.8 Government Debt (as a percentage of GDP) … … … … 18

1.9 Policy Interest Rate Corridor and Selected Market Interest Rates ... ... … 19

1.10 Year-on-year Growth of Money and Credit to Private Sector … ... ... … 20


2.1 Annual Growth Rate … … … ... 39

2.2 Rice: Supply and Demand … … … ... 42

2.3 Industrial Production Index … … … ... 51

2.4 Composition of Industrial Production - 2012 … … … ... 52

2.5 Investment in Approved and Contracted BOI Projects (Including Projects Expanded) … ... 64

Number of Projects … … … ... 64

Value of Investment … … … ... 64

2.6 The Economy in 2012 (at current prices) … … … ... 65

Supply of Goods and Services … … … … 65

Demand for Goods and Services … … … … 65


3.1 Telephone Density … … … ... 69

3.2 Average Tariff and Cost of Electricity … … … ... 75

3.3 International Crude Oil (Brent) Prices (Monthly Average) 2011/2012 … … ... 76

3.4 Volume of Container Handling and Transshipments … … … ... 84

3.5 Government Expenditure on Health and Education … … … ... 87 3.6 Number of Samurdhi Beneficiary Families and Expenditure … … ... … 93

4. PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

4.1 Colombo Consumers’ Price Index (2006/07=100) … … … ... 98

4.2 Trends in Labour Force and Unemployment 2008–2012 … … ... … 111


5.1 Balance of Payments … … … … 120

5.2 Major Sources of Foreign Exchange Earnings … … … … 120

5.3 Exports by Commodities - 2012 … … … … 124

5.4 Imports by Commodities - 2012 … … … … 127

5.5 Exports, Imports and the Trade Balance … … … … 128

5.6 Terms of Trade and Trade Indices … … … … 130

5.7 Exports by Destinations … … … … 131

5.8 Imports by Origin … … … … 131

5.9 Tourist Arrivals in 2012 by Country … … … … 133

5.10 Tourist Arrivals and Earnings From Tourism … … … … 134

11 Inflows to the Capital and Financial Account … … … … 136

5.12 Quarterly International Reserves (Incuding ACU balances) … … … … 139

5.13 External Debt … … … ... 143

5.14 Exchange Rate Movements … … … ... 146

Exchange Rate Movement - Rupees per US $ … … … … 146

Effective Exchange Rate Indices: 24-currency (2010=100) … … … … 146

5.15 Quarterly Inter-Bank Forward Transaction Volumes … … … … 147


6.1 Major Fiscal Indicators (as a percentage of GDP) … … … … 150

6.2 Composition of Government Revenue – 2012 … … … … 154

6.3 Composition of Government Current Expenditure – 2012 … … … … 157

6.4 Total Expenditure by Function – 2012 … … … … 159

6.5 Deficit Financing (as a percentage of GDP) … … … … 162

6.6 Sources of Bank Financing … … … … 162

6.7 Outstanding Government Debt … … … … 164

6.8 Composition of Outstanding Domestic Debt - 2012 … … … … 165

6.9 Composition of Outstanding Foreign Debt - 2012 … … … … 165

6.10 Currency Composition of Total Outstanding Debt - 2012 … … … … 166

6.11 Government Debt Service Payments (as a percentage of GDP) … … … … 167


7.1 Policy Interest Rate Cycles … … … … 172

7.2 Overnight Rupee Liquidity in the Domestic Money Market (2011-2012) … … … 175

7.3 Year-on-Year Growth of Monetary Aggregates … … … … 176

7.4 Annual Increase in Domestic Credit (2000-2012) … … … … 178

7.5 Volume and Growth of Loans and Advances granted to the

Private Sector by Commercial Banks … … … … 178

7.6 Year-on-Year Growth of Outstanding Credit to Key Sectors (%) … … … … 179

7.7 Year-on-Year Growth of Credit Extended to the Private Sector … … … … 181

7.8 Year-on-Year Growth of Savings and Time Deposits … … … … 182

7.9 Average Weighted Call Money Rate and Policy Interest Rates … … … … 182

7.10 Movement of Selected Market Interest Rates … … … … 183

7.11 Average Weighted Lending Rates by Type of Security (%) … … … … 184

7.12 Secondary Market Yield Curve for Government Securities … … … … 185


8.1 Off Balance Sheet Exposure of the Banking Sector ... ... … … 190

8.2 Non-Performing Loans of the Banking Sector ... ... … … 190

8.3 Provisions for NPLs of the Banking Sector … … … … 193

8.4 Sector-wise Credit Exposure of the Banking Sector … … … … 193

8.5 Liquidity Ratios of the Banking Sector … … … … 194

8.6 Cumulative Maturity Gap-% of Cumulative Liabilities of the Banking Sector … … … 194

8.7 Profitability Indicators of the Banking Sector … … … … 195

8.8 Capital Adequacy Ratios of the Banking Sector … … … … 196

8.9 Product-wise Accommodations of the NBFI Sector … … … … 197

8.10 Non-Performing Accommodations and Provisions Coverage of the NBFI Sector … … 198

8.11 Profitability Indicators of the NBFIs Sector … … … … 199

8.12 ASPI, MPI and Market Capitalisation of the CSE … … … … 210

8.13 Turnover and Foreign Participation at the CSE … … … … 211

PART I - BOXES

Page

1. Bridging the Savings-Investment Gap to Sustain High Economic Growth in Sri Lanka … … 5

2. Challenges in Increasing the Per Capita Income Beyond USD 4,000 … … … 12

3. The Divi negum National Programme: The National Drive to Create Prosperous Village

with Healthy and Economically Empowered Households … ... … ... 34

4. Developing Technology Business Incubators for a Technopreneurial Culture … … … 55

5. Mobile Communication Technology towards Economic Growth … ... … ... 70

6. Solid Waste Management ... ... … ... 94

7. Economic Implications of the Age Structure Transition of the Population … … ... 108

8. Skills and High Quality Human Capital for Sustainable Growth … … ... 114

9. A New Approach for Assessing the International Reserve Adequacy … … … 141

10. Interconnectedness of Financial Institutions and Systematic Risk … … … ... 191

11. Consequences of Unauthorised Finance Business … ... … 200

12. The Clean note policy ... … … ... 215

13. Major Economic Policy Changes and Measures ... … ... … 219

STATISTICAL APPENDIX

Table

NATIONAL OUTPUT AND EXPENDITURE

Gross National Product by Industrial Origin at Current Prices of Major Economic Activities … … 1

Gross National Product by Industrial Origin at Constant (2002) Prices of Major Economic Activities … 2

Gross National Product by Industrial Origin of Major Economic Activities … … … 3

Provincial Gross Domestic Product by Industrial Origin at Current Prices (2007-2011) … … 4

Resources and their Utilisation … … … … 5

Reconciliation of Key Aggregates at Current Market Prices … … … … 6

Gross Domestic Capital Formation at Current Market Prices … … … … 7

Composition of Private Consumption Expenditure at Current Market Prices … … … 8

Expenditure on Gross National Product at Current Market Prices … … … … 9

Gross Domestic Expenditure and Availability of Resources … … … … 10

Investment and Savings at Current Market Prices … … … … 11

Real National Income … … … … 12

Trends in Principal Agricultural Crops … … … … 13

Production of Tea, Rubber, Coconut and Other Export Agriculture Crops … … … 14

Annual Rainfall and Rainy Days … … … … 15

District-wise Performance of the Paddy Sector … … … … 16

Paddy Production … … … … 17

Performance of Other Field Crops … … … … 18

Statistics of the Sugar Sector … … … … 19

Statistics on the Forestry Sector … … … … 20

Value Added in Industry (2002 Constant Prices) … … … … 21

Value Added in Industry (Current Prices) … … … … 22

Investment Approvals in Industry by the Board of Investment of Sri Lanka … … … 23

Realised Investments in the Board of Investment (BOI) Enterprises … … … … 24

Capacity Utilisation in Industry … … … … 25

Employment in Selected State Owned Enterprises … … … … 26

Table

Performance of Selected State Owned Enterprises … … … … 27

Regional Distribution of Industrial Enterprises … … … … 28

Industrial Production Index (IPI) of Major Divisions … … … … 29

Industiral Production Index … … … … 30

ECONOMIC AND SOCIAL INFRASTRUCTURE

Salient Features of Government Health Services … … … … 31

Salient Features of General and University Education … … … … 32

Telecommunications and Postal Services … … … … 33

Energy Sector Performance … … … … 34

Salient Features of the Transport Sector … … … … 35

Performance of the Port Services … … … … 36

Land Cultivated under the Mahaweli Development Programme … … … … 37

PRICES, WAGES, EMPLOYMENT AND PRODUCTIVITY

Movement of the Colombo Consumers’ Price Index (CCPI) (2002=100) … … … 38

Movement of the Colombo Consumers’ Price Index (CCPI) (2006/07=100) … … … 39

Colombo Consumers’ Price Index (CCPI) (2002=100) … … … … 40

Colombo Consumers’ Price Index (CCPI) (2006/07=100) … … … … 41

Wholesale Price Index (WPI) … … … … 42

Average Retail Prices of Selected Food Items by Province 2011 - 2012 … … … 43

Wholesale Prices of Selected Commodities … … … … 44

Wage Rate Indices … … … … 45

Average Daily Wages in the Informal Sector … … … … 46

Average Daily Wages of Informal Sector by Province 2011-2012 … … … … 47

Demography … … … … 48

Population by District … … … … 49

Labour Force Participation Rate … … … … 50

Status of Employment … … … … 51

Employment by Economic Activity … … … … 52

Labour Force Trends … … … … 53

Public Sector Employment … … … … 54

Foreign Employment … … … … 55

Employees’ Provident Fund … … … … 56

Employees’ Trust Fund … … … … 57

Strikes in Private Sector Industries … … … … 58

EXTERNAL SECTOR DEVELOPMENTS AND POLICIES

Central Bank Trade Indices – Value … … … … 59

Central Bank Trade Indices – Volume … … … … 60

Central Bank Trade Indices – Unit Value … … … … 61

Foreign Trade … … … … 62

Exports … … … … 63

Tea Exports, Sales and Prices … … … … 64

Volume and Value of Tea Exports … … … … 65

Country Classification of Tea Exports … … … … 66

Rubber Exports and Prices … … … … 67

Major Rubber Export Destinations … … … … 68

Country Classification of Garment Exports … … … … 69

Major Coconut Products Exports and Prices … … … … 70

Table

Volume and Value of Exports of Other Agricultural Products … … … … 71

Selected Industrial and Mineral Exports … … … … 72

Imports by Major Categories … … … … 73

Imports … … … … 74

Imports and Exports of Major Commodities … … … … 75

Direction of Trade - Exports … … … … 76

Direction of Trade - Imports ... ... ... ... 77

Tourism Performance … … … … 78

Some Indicators of the Regional Distribution of the Tourist Trade … … … … 79

Balance of Payments … … … … 80

Balance of Payments - Standard Presentation under BPM 5 ... … … … 80A Services, Income and Transfers … … … … 81

Workers’ Remittances … … … … 82

External Resources and their Uses … … … … 83

Financing of the External Resources Gap … … … … 84

External Debt Outstanding and Banking Sector External Liabilities ... … … … 85

End of Period Exchange Rates … … … … 86

Average Exchange Rates of Major Currencies and Monthly Indices of Nominal Effective

Exchange Rate (NEER) and Real Effective Exchange Rate (REER) … ... … 87

Interbank Forward Market Transactions … … … … 88

Absorption and Supply of Foreign Exchange by the Central Bank … … … … 89

FISCAL POLICY AND GOVERNMENT FINANCE

Summary of Government Fiscal Operations … … … … 90

Government Revenue … … … … 91

Payments of the Government of Sri Lanka … … … … 92

Voted Expenditure of the Government of Sri Lanka – 2012 … … … … 93

Voted Expenditure of the Government of Sri Lanka – 2013 … … … … 94

Current Transfers to Public Corporations and Institutions … … … … 95

Capital Transfers to Public Corporations and Institutions … … … … 96

Acquisition of Financial Assets (Loan Outlays) … … … … 97

Financing of the Government Net Cash Deficit … … … … 98

Economic Classification of Government Revenue … … … … 99

Economic Classification of Government Expenditure and Lending Minus Repayments … … 100

Economic Classification of Government Fiscal Operations … … … … 101

Composition of Outstanding Government Debt … … … … 102

Ownership of Government Debt (as at end of the year) … … … … 103

Ownership of Treasury Bills … … … … 104

Ownership of Treasury Bonds … … … … 105

Ownership of Rupee Loans … … … … 106

Ownership of Outstanding Foreign Debt … … … … 107

Foreign Loans – 2012 … … … ... 108

Net Receipts of Foreign Assistance … … … … 109

Outstanding Central Government Debt (as at end of the year) … … … … 110

Budget Outturn for Provincial Councils … … … … 111

Consolidated Budget … … … … 112

MONETARY POLICY, MONEY, CREDIT AND INTEREST RATES

Currency Issued by the Central Bank (by Denomination) … … … … 113

Monetary Aggregates – M1 and M2 … … … … 114

Monetary Survey – M2 … … … … 115

Consolidated Monetary Survey – M2b … … … … 116

Financial Survey – M4 … … … … 117

Monetary Aggregates - Summary … … … … 118

Reserve Position of Commercial Banks … … … … 119

Money Rates : The Central Bank and Commercial Banks … … … … 120

Money Rates: Savings and Long Term Credit Institutions … … … … 121

Yield Rates on Government Securities … … … … 122

Commercial Banks’ Loans and Advances by Type of Security (End of Period) … … … 123

Commercial Banks’ Loans and Advances to the Private Sector … … … … 124

FINANCIAL SECTOR PERFORMANCE AND SYSTEM STABILITY

Assets and Liabilities of the Central Bank … … … … 125

Assets and Liabilities of Domestic Banking Units (DBUs) of Commercial Banks … … … 126

Assets and Liabilities of Offshore Banking Units (OBUs) of Commercial Banks … … … 127

Assets and Liabilities of Non-Bank Financial Institutions … … … … 128

Savings and Fixed Deposits of Deposit-taking Institutions … … … … 129

Insurance Activities … … … … 130

Share Market Performance … … … … 131

Debentures Listed on the CSE in 2012 … … … … 132

Total Cultivation Loans Granted by the Lending Banks (position as at 31 December 2012) … … 133

New Comprehensive Rural Credit Scheme – Loans Granted for Subsidiary Food crops by

the Leading Bank (Poition as at 31 December 2012) … … … … 134

Operations of the Crop Insurance Programme – Paddy Sector

(Position as at 31 December 2012) … … … … 135

Deposits and Advances of District Co-operative Rural Banks’ (2002 – 2012) and

District-wise Classification for 2012 … … … ... 136

Deposits and Advances of District Co-operative Rural Banks’ Unions (2004 – 2012) and

District-wise Classification for 2012 … … … … 137

SPECIAL STATISTICAL APPENDIX

Table

1. Real Sector:

Population and Labour Force … … … ... 1

National Output and Prices … … … ... 2

2. External Sector:

Balance of Payments … … … ... 3

International Reserves, External Debt and Exchange Rates … … ... ... 4

3. Fiscal Sector:

Government Fiscal Operations … … … ... 5

Government Debt … … … ... 6

4. Financial Sector:

Monetary Survey … … … ... 7

Interest Rates … … … ... 8

5. Socio-economic Conditions: 1953 – 2009/10

Key Socio-economic Indicators in Sri Lanka ... ... ... ... 9

Key Socio-economic Indicators by Province ... … ... ... 10

Key Socio-economic Indicators by Sector ... ... ... ... 11

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