Sunday, 19 January 2020 08:45

Sri Lanka economy sustains amidst falling oil prices

Despite the increase in budget deficit, Sri Lanka’s economy will be able to sustain as a result of declining oil prices with the easing of fears of conflict between the U.S. and Iran.

As a 100% oil importing country and oil forming one-fourth of its total import bill, Sri Lanka no doubt gains from low global oil prices.

During the period (11.01.2020 to 17.01.2020), crude oil prices showed a mixed trend. In the beginning of the period, crude oil prices decreased as fears of conflict between the U.S. and Iran eased.

Overall, both Brent and WTI prices fell by US$ 0.5 per barrel and US$ 0.9 per barrel, respectively, during the period.

During the first ten months of 2019, overall budget deficit as a percentage of estimated GDP increased to 5.3 per cent from 4.4 per cent recorded in the corresponding period of the previous year, Central Bank announced.

Government revenue as a percentage of estimated GDP declined to 10.2 per cent from 11.0 per cent recorded in the corresponding period of 2018.

During the same period, total expenditure and net lending as a percentage of estimated GDP remained unchanged at 15.5 per cent as recorded in the corresponding period of 2018.

In financing the budget deficit, domestic financing increased to 3.9 per cent of estimated GDP compared to 2.7 per cent of GDP in the corresponding period of 2018, while foreign financing as a percentage of estimated GDP declined to 1.5 per cent from 1.7 per cent recorded in the corresponding period of 2018.

In nominal terms, outstanding central government debt increased to Rs. 12,893.9 billion by end October 2019 from Rs. 11,977.5 billion at end 2018.

Accordingly, total outstanding domestic debt increased by 8.0 per cent to Rs. 6,500.7 billion, and the rupee value of total outstanding foreign debt increased by 7.3 per cent to Rs. 6,393.2 billion by end October 2019.

The reserve money increased compared to the previous week mainly due to the increase in currency in circulation and deposits held by the commercial banks with the Central Bank.

The total outstanding market liquidity was a deficit of Rs. 7.230 bn by end of the week, compared to a deficit of Rs. 6.236 bn by the end of last week.

During the year up to 17th January 2020 the Sri Lanka rupee appreciated against the US dollar (0.1%).

(LI)

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