Sri Lanka: Remittances rise 13% to $6.8 billion

COLOMBO: Sri Lanka’s economy grew a weaker-than-expected 7.3 percent last year, the country’s central bank said as it kept interest rates at multi-year lows as it looks to boost private investment and lending.
Sri Lankans employed abroad sent home $6.8 billion over the year, up 13 percent from 2012 while earnings from tourism jumped 35 percent to $1.4 billion in 2013, according to official figures.
The Central Bank of Sri Lanka said last year’s expansion was much stronger than the 6.3 percent recorded in 2012 thanks to a pick-up in exports and foreign remittances.
However, the figure was below the bank’s 8.0 percent forecast as an expected rise in lending had not taken place.
“Credit to the private sector by commercial banks moderated, growing only by 5.2 percent in January 2014 in comparison to 7.5 percent in December 2013,” the bank said in its monthly review of the economy.
Officials said the softer data came as loans to the private sector rose just 15.5 percent last year, well short of estimates of 18 percent.
But the bank said its Monetary Board viewed the deceleration in those loans to be “temporary.”
It added: “Private sector credit is likely to rebound from the second quarter of (2014), supported by declining market lending rates, sufficient liquidity levels and increased demand for exports from the advanced economies.”
The bank kept rates on hold Friday after cutting them by 50 basis points to 8.0 percent in January — the lowest since it began publishing them in 1999 — as it looks to boost private-sector lending.
In January the the bank said record remittances and tourism earnings helped wipe out a trade deficit in 2013 and improve foreign reserves in a country relying heavily on external debt.
Official figures showed Sri Lanka’s overall balance of payments ended up with a surplus of $991 million, compared with a modest surplus of $151 million in 2012 and a deficit of $1.06 billion in 2011.
The improvement in the balance of payments was also helped by garment exports which increased by 26 percent while the island’s main export commodities of tea and coconut also increased significantly.
The IMF had warned Sri Lanka late last year against rate cuts and forecast 2013 growth at 6.5 percent.
Sri Lanka’s economy recorded 8.0 percent-plus growth for two straight years after troops crushed separatist Tamil Tiger rebels in 2009, but the pace has slowed in the last two years.