Central Bank differs rate hike, as inflation gallops ahead

Sri Lanka's budget deficit expands and reserves make a small recovery, as the government differs payments and opts for dollar bonds to balance the books.

Sri Lanka's budget deficit expands and reserves make a small recovery, as the government differs payments and opts for dollar bonds to balance the books. The overall budget deficit for first eight months has moved up to 5.

6 percent, according to preliminary Central Bank estimates, indicating that year-end deficit may touch 8.5 percent.

A lethal cocktail of galloping world oil prices, a prolonged drought, hefty government subsidies and falling tax revenues, has taken the shine off government finances this year.

The Central Bank said Sri Lanka's balance of payments deteriorated to a record US$ 250 mn deficit in the seven months to July compared with a surplus of US$ 502 mn last year.

The downturn is partly due to less-than-expected disbursement of foreign aid and a delay in selling off a third of downstream assets to a foreign player.
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On the external front, exports grew by 8.4 percent (in US dollar terms) while imports grew by 19 percent from Jan-July, which helped widen the trade defi