The decision was arrived at after serving that the policy adjustments made on the monetary and external fronts are still being transmitted gradually to the macroeconomy.

Inflation, measured by the Colombo Consumers’ Price Index, decelerated to 2.8 per cent, on a year-on-year basis, in December 2015 from 3.1 percent in November 2015. Inflation based on the National Consumer Price Index decelerated to 4.2 percent, on a year-on-year basis, in December 2015 from 4.8 percent in the previous month.

Last month, the Central Bank increased the Statutory Reserve Ratio (SRR) applicable on all rupee deposit liabilities of commercial banks by 1.50 percentage points to 7.50 per cent with effect from 16 January 2016.  Subsequently, excess rupee liquidity in the domestic money market fell from around 90 billion rupees in December to around 42 billion rupees, on average, the board said in its Monetary Policy Review issued for January 2016.

The statement said, earnings from tourism are estimated to have increased by 17.8 per cent during 2015. Although worker’s remittances declined by 0.5 per cent, during the year,mainly reflecting a decline of receipts from the Middle East.

Gross official reserves were  estimated at US dollars 7.3 billionby end 2015, while the Sri Lanka rupee, which depreciated by 9.0 per cent against the US dollar in 2015, recorded a marginal appreciation thus far during 2016, the Monetary Board revealed.

In November 2015, the net foreign assets of the banking sector improved with the receipt of the International Sovereign Bond (ISB) of 1.5 billion dollars issued on 27 October 2015.

“The issuance of the ISB also facilitated a reduction of net credit obtained by the government from the banking sector during the month of November, while credit obtained by public corporations also declined.”