Dr. Indrajit Coomaraswamy

Sri Lanka is considering a major overhaul to its present taxation framework and proposals pertaining to the same will be made in the Budget 2017 to be presented in Parliament in November, the governor of the Central Bank of Sri Lanka, Dr. Indrajit Coomaraswamy said. Addressing a press conference to announce the Monetary Policy decision for August held at the Central Bank premises last week, Dr. Coomaraswamy said this amendment is being made with a motive of simplifying taxes and increasing the tax base.

“The outcome of the review will be presented in November,” Dr. Coomaraswamy said.
The Monetary Board of the Central Bank last week decided to maintain the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) of the Central Bank unchanged at 7.00 per cent and 8.50 per cent, respectively.

Explaining the rationale of the decision, the governor said the Monetary Board projects the impact of the policy measures adopted during the first seven months of the year through increasing policy interest rates and the Statutory Reserve Ratio (SRR) to be transmitted to the economy gradually.

“Although private sector credit growth failed to show a decelerating impact in the months of May, June and July increasing by about 28%, we are still hopeful through our current policy measures, it (growth) will moderate to an 18% level by the end of this year if the government fiscal space stays on track,” the governor said.

The Central Bank said that credit granted to the private sector by commercial banks continued to increase at a significantly high rate of 28.2 per cent in June 2016, on a year-on-year basis, in comparison to 28.0 per cent recorded in the previous month.
Meanwhile, Sri Lanka’s consumer prices rose by 4.3 percent in August from a year earlier, slowing down from the previous month’s 5.5 percent growth, data from the Department of Census and Statistics showed on Wednesday.

On the external front, the trade deficit is estimated to have expanded by 2.2% during the first half of 2016, on a year-on-year basis, as external demand remained relatively weak. Earnings from tourism were estimated to have increased by around 16.7% during the period from January to July 2016, with a record number of tourist arrivals during the month of July. Workers’ remittances increased by 3.8 per cent during the first seven months of the year.