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Sri Lanka tightens fiscal policy curtailing currency circulation

Sri Lanka Finance Ministry has tightened fiscal policy while controlling government expenditure to divert cash flows towards defense spending following the Easter Terror attack in the country.

The reserve money decreased this week compared to the previous week mainly due to the decrease in currency in circulation and deposits held by the commercial banks, Central Bank announced

Commercial banks are required to keep as cash according to the directions of the Central Bank enabling banks to increase the number of loans to give consumers and businesses. This increases the money supply, economic growth and the rate of inflation.

The total outstanding market liquidity was a surplus of Rs. 73.99 bn by end of the week, compared to a surplus of Rs. 61.54 bn by the end of last week.

During the year up to 17 May 2019 the Sri Lanka rupee appreciated against the US dollar (3.7 per cent).

Given the cross currency exchange rate movements, the Sri Lanka rupee appreciated against the pound sterling (2.9 per cent), Japanese yen (3.2 per cent), the euro (6.1 per cent) and the Indian rupee (4.1 per cent) during this period.

The gross official reserves were estimated at US dollars 7,212.7 million as at 30th April 2019.

(LI)

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