Interest Rates

The Central Bank’s overnight Repurchase (Repo) rate remained at 11.50 per cent, while Reverse Repurchase (Reverse Repo) rate increased to 13.85 per cent on 04th April 2002, from 13.65 per cent. The Bank Rate was 18 per cent during the month.

The yields on Treasury bills for all maturities fluctuated during the month with market liquidity changes due to the New Year season. The weighted average yield on 91-day Treasury bills in the primary market increased from 12.75 per cent per annum at end- March 2002 to 12.94 per cent per annum on 05th April 2002 and subsequently decreased gradually during the month to reach 12.83 per cent at endApril 2002. The yields on 182-day and 364-day Treasury bills increased from 12.90 per cent and 13.61 per cent at end March to 12.98 per cent and 13.78 per cent, respectively on 05th April 2002 and subsequently decreased gradually to 12.87 per cent and 13.52 per cent, respectively towards the end of April 2002.

The yields on Treasury bills in the secondary market, on 91-day Treasury bills sold (discounted) by the Central Bank increased to 12.78 per cent at end April 2002 from 12.70 per cent at end March 2002, while yield on bills purchased (rediscounted) by the Central Bank, also increased by 8 basis points to reach 14.08 per cent at end April 2002.

Similarly interest rates in the inter-bank money market also fluctuated in April 2002. Call money matket rates fluctuated in a range of 11.50-13.50 per cent per annum in April 2002, compared to the range of 11.75-12.75 per cent per annum in March. The Sri Lanka Inter-Bank Offered Rate (SLIBOR) for overnight transactions decreased from 12.35 per cent at end-March 2002 to 12.00 per cent at end-April 2002. SLIBOR for one week and one month were 12.27 per cent and 12.46 per cent, respectively, at end-April 2002. SLIBOR for 3 months, 6 months and 12 months meanwhile, at end-April 2002, were 12.56 per cent, 13.02 per cent and 13.67 per cent, respectively.

The weighted average prime lending rate (AWPR) of commercial banks decreased from 13.55 per cent per annum at end-March 2002 to 13.47 per cent per annum at end-April 2002.

Foreign Currency Banking Units

Total resources of the foreign currency banking units (FCBUs) decreased from US dollars 1,840.9 million (Rs.176,068 million) at end March 2002 to US dollars 1,787.1 million (Rs.171,805 million) at end April 2002.

With respect to assets, loans and advances granted to the resident category decreased by US dollars 6.1 million while loans and advances granted to the non-resident category decreased by US dollars 48.5 million in April. Internal accounts of the FCBUs increased by US dollars 0.8 million in April 2002.

On the liabilities side, deposits held by the resident category decreased by US dollars 34.3 million while deposits of the non-resident category decreased by US dollars 23 million. Meanwhile, internal accounts increased by US dollars 3.4 million in April 2002.

The maturity pattern of deposits and advances of FCBUs as at end April 2002 is shown in Table IV. At the end of April 2002, the share of short-term (less than 12-months) deposits in total deposits was 86 per cent, while the share of shortterm loans and advances in total loans and advances was 78 per cent.

SHARE MARKET

Activity at the Colombo Stock Exchange (CSE) recorded an improvement in May 2002. The main reason for this was an increase in the participation of foreigners in the activities of CSE resulting in net foreign inflows in May. The CSE introduced Information Technology as a category in the sectoral categorisation of listed companies, increasing the total number of sectors from 18 to 19, by end of May.

The All Share Price Index (ASPI) and the Milanka Price Index (MPI) increased in May, along with an increase in turnover and prices. The ASPI increased by 67.5 index points from 617.2 at end April, to 684.7 by end-May, while the MPI increased by 113.0 index points from 1,026.2 at end-April to 1,177.8 by the end of May. Net cumulative foreign purchases at the CSE in 2002, amounting to Rs.1,130 million by endMay.

An improvement was also seen in the debt market. Debt market capitalisation at the CSE was Rs.8.5 billion at the end of May 2002, while the corresponding value for May 2001 was Rs.6.6 billion. Turnover in the debt market also increased and was nine times as much as in May 2002. Aitken Spence & Company Ltd. offered 4 million unsecured redeemable debentures to the public, at a par value of Rs.100 each, in May 2002.

Government Finance

According to provisional data, total government revenue in March 2002 amounted to Rs.17,108 million and total government expenditure amounted to Rs.30,210 million. Government loan operations during the month resulted in a net borrowing of Rs.12,489 million. Total government outstanding debt during March 2002 increased by Rs.25,287 million and stood at Rs.1,500,123 million at end March 2002.

Revenue

There was a 15 percent decrease in government revenue in March 2002 over the same period in 2001. Both tax revenue and non tax revenue decreased by 13 per cent and 25 per cent, respectively. The decrease in tax revenue was mainly an outcome of the decrease in the collection of excise tax (Rs.1,016 million), import duties (Rs.666 million), stamp duty, (Rs.659 million) and income tax (Rs.241 million). The non-tax revenue in March 2002 recorded a reduction (Rs.803 million) in comparison to March 2001, which included Rs.1,000 million of Central Bank profit transfers.

Government revenue during the first quarter of 2002 increased by Rs.8,286 million, which was a 14 per cent increase over the corresponding period in 2001. Higher revenue was mainly from the increased non-tax revenue collection (Rs.5,618 million) as the profit transferred from Central Bank increased by Rs.5,000 million. In the collection of tax revenue, increases were recorded mainly in National Security Levy (Rs.1,499 million), GST/TT (Rs.1,187 million) and excise tax (Rs.1,073 million), while revenue from stamp duty decreased by Rs.784 million.

Government Expenditure

According to provisional data, total government expenditure in March 2002 amounted to Rs.30,210 million. Of the total, current expenditure was Rs.23,762 million, while capital expenditure amounted to Rs.6,448 million.

Total government expenditure during the first three months in 2002 was Rs.101,164 million, a 3 per cent increase over the same period in 2001. Current expenditure amounted to Rs.82,858 million, while capital expenditure and net lending amounted to Rs.18,306 million. Total interest payments during the period under review increased by 32 per cent to Rs.29,700 million compared to the corresponding period in 2001.

Loan Operations

Total net borrowings to finance the resource gap in March 2002 totalled to Rs.12,489 million. Net domestic borrowings amounted to Rs.13,465 million, while net foreign borrowings recorded a repayment of Rs.976 million. Government deposit balances with the banking system increased by Rs.5,720 million to Rs.31,621 million during the month under review.

Government Debt

At the end of March 2002, the total outstanding government debt stood at Rs.1,500,123 million, which was about 2 per cent increase over the outstanding debt stock at the end of February 2002. This was due to the increase in the outstanding domestic debt stock by Rs.9,274 million to Rs.843,459 million and significant increase in the outstanding foreign debt stock by Rs.16,013 million to Rs.656,665 million. The increase in domestic debt stock was a combined outcome of the increase in Treasury bonds (Rs.7,100 million) and Rupee loans (Rs.3,132 million) and the decrease in other short-term borrowings (Rs.1,222 million). The increase in foreign debt stock was due to the increase in net foreign borrowings of Rs.835 million and the significant impact of exchange rate variation of Rs.15,177 million. This high level of exchange rate variation was due to the depreciation of Rupee by 3.0 per cent, 2.6 per cent and 2.0 per cent against the three major currencies viz. Japanese Yen, Special Drawing Rights and US dollars, respectively during the month.
(To be Continued)