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The Annual report of the Central Bank of Sri Lanka issued on Monday the 09th April reveals that the US D 59 billion worth of Sri Lankan economy grew by 8.3 per cent in 2011, the highest in Sri Lanka’s post independence history, sustaining a growth momentum of over 8 per cent for the first time in two consecutive years.
Improved consumer and investor confidence arising from the peace dividend, favourable macroeconomic conditions, increased capacity utilization, expansion of infrastructure facilities and renewed economic activity in the Northern and Eastern provinces underpinned this growth.
Growth, Inflation and Unemployment
- Economic growth increased to its highest level of 8.3 per cent - the first time the country recorded above 8 per cent growth in two successive years.
- Per capita income increased to US dollars 2,836 from US dollars 2,400 in the previous year.
- Inflation remained subdued at single digit levels for the third consecutive year.
- Unemployment declined to 4.2 per cent, the lowest level recorded thus far.
- Substantial improvements in youth unemployment
- Growth of exports, which was at 22.4 per cent was far outpaced by the growth of imports at 50.7 per cent
- Trade deficit widened sharply to 16.4 per cent of GDP.
- Tourist arrivals crossed 850,000 with earnings recording US dollars 830 million.
- Workers' remittances reached US dollars 5.1 billion
- Current account deficit remained substantially higher at 7.8 per cent of the GDP compared to the average deficit of around 3.1 per cent over the last ten years.
- Foreign direct investments in the country exceeded US dollars 1 billion for the first time.
- The balance of payments recorded a deficit of US dollars 1.1 billion.
- Gross official reserves by year end were US dollars 6.0 billion compared to US dollars 6.6 billion as at December 2010.
- The rupee depreciated by 2.6 per cent against the US dollar by year end.
- Emphasis on fiscal consolidation continued in 2011.
- A shortfall in revenue was reflected in the decline in the revenue to GDP ratio to 14.3 per cent from 14.6 per cent in 2010.
- Total expenditure and net lending was maintained at 21.4 per cent of GDP.
- Overall fiscal deficit was 6.9 per cent of GDP, marginally above the targeted level.
- Government debt to GDP ratio fell to 78.5 per cent from 81.9 per cent in 2010, the first time in nearly 30 years that the ratio was lower than 80 per cent.
- Government issued the fourth international sovereign bond, amounting to US dollars 1 billion.
Monetary and Financial Sector
- Key policy interest rates were reduced in January 2011 to enhance investments by the private sector.
- The Statutory Reserve Ratio was raised by 1 percentage point to 8 per cent in April in order to permanently absorb a part of excess liquidity.
- Monetary expansion, at 19.3 per cent on average, continued to remain above the targeted level.
- Market interest rates were broadly stable during the first three quarters of the year but began increasing thereafter.
- Stability of the financial system continued to be well safeguarded.
- A new Finance Business Act was enacted while several new Directions were issued.
- Non-performing loan ratios declined over the year.
- Banking system remained well capitalised despite a decline in the capital adequacy ratios.
- Further progress was made towards improving access to finance with the expanding branch network of financial institutions.