This document provides an economic update from Sri Lanka in March 2014. It includes the following highlights: 1) Commercial Bank was named Sri Lanka's Best Bank by Global Finance magazine. Several Sri Lankan economic indicators for January 2014 are reported, including a 23.2% increase in exports and a 7.9% increase in imports, leading to a smaller trade deficit. 2) Sri Lanka raised $500 million from a sovereign bond offering at a yield of 5.125%, the lowest among its international bond offerings. The order book was oversubscribed 8.3 times. 3) The ADB forecasts Sri Lanka's GDP growth to remain at 7.5% in 2014 and 2015, supported by strengthening

1. Economic Capsule
March 2014
Research & Development Unit

2. ECONOMIC & BUSINESS NEWS 
 Commercial Bank Named Sri Lanka’s Best Bank by Global Finance, USA
 Now, Fixed Deposits and Loans from Commercial Bank Online Banking
 Maximum Deposit Interest Rates Payable by Licensed Finance Companies
FINANCIAL SECTOR NEWS 
 Sri Lanka Raise USD 500 mn from Sovereign Bond
 Sri Lankan Airlines goes for a USD 150 mn Term Facility
 External Sector Performance January 2014
 Colombo Consumers Price Index, March 2014
ANALYSIS & FORECAST
 ADB Outlook for Sri Lanka
C O N T E N T S

3. B a n k i n g N e w s

4. < Research & Development Unit >
Commercial Bank Named Sri Lanka‟s
Best Bank by Global Finance, USA
 Commercial Bank has been rated the Best Bank in Sri
Lanka by Global Finance, one of the world‟s leading
publications serving the international business
community.
 Criteria for choosing the winners included growth in
assets, profitability, strategic relationships, customer
service, competitive pricing, and innovative products.
 In addition, for the first time, a poll of Global Finance‟s
corporate readership was conducted in order to increase
the accuracy and reliability of the results.

5. < Research & Development Unit >
Now, Fixed Deposits and Loans from
Commercial Bank Online Banking
Online Banking customers of Commercial Bank of
Ceylon can now apply for Fixed
Deposits, Personal Loans and Housing Loans
using Online Banking via www.combank.lk
 Commercial Bank‟s Online Banking service already offers customers the ability to check
balances of their current, savings, investment, loan, and credit card accounts, and to
transfer funds between own accounts and to registered third parties who have Commercial
Bank accounts, on a real-time basis around the clock.
 The Online Banking service also supports bill payments to more than 36 entities in nine
categories such as Telephone, Electricity, Water, Credit Cards, Insurance, Pay TV, Schools
and Rates.

6. < Research & Development Unit >
Maximum Deposit Interest Rates Payable
by Licensed Finance Companies
Maximum interest rates that could be offered for deposits accepted, maintained or
renewed by the finance companies licensed under the Finance Business Act, No.42 of
2011 has been revised with effect from the 1st April 2014, as follow:
a. The maximum interest rate that could be offered for savings deposits
accepted or maintained shall be 7.58% p.a.
b. The maximum interest rates that could be offered for deposits accepted or
renewed shall be as follows,
− For maturity period of one year or less - 11.01% p.a.
− For maturity period of over one year and up to three years - 12.01% p.a.
− For maturity period of over three years - 13.51% p.a.
In case where a savings or fixed deposit is made by a person who is over fifty five (55)
years of age, a finance company may pay an additional interest rate of one per cent
above the maximum interest rates as specified in (a) and (b) above.

7. E c o n o m i c & B u s i n e s s N e w s

8. < Research & Development Unit >
Sri Lanka Raise USD 500 mn from
Sovereign Bond
Year
Amount
(USD mn)
Period
Interest
Rate %
2007 500 5 year 8.25
2009 500 5 year 7.40
2011 1000 10 year 6.25
2012 1000 10 year 5.875
2014 Jan 1000 5 year 6.00
2014 Apr 500 5 year 5.125
 The Central Bank of Sri Lanka (CBSL), launched
and priced a USD 500 mn 5-year International
Sovereign Bond (Issue) on 07.04.2014 at a yield of
5.125 % p.a. which was the lowest among all the US
Dollar benchmark offering by Sri Lanka in the
international bond markets.
 The Issue was the seventh benchmark offering
by Sri Lanka since 2007. Citigroup, The
Hongkong and Shanghai Banking Corporation
Limited and Standard Chartered Bank acted as
Joint Lead Managers/Bookrunners on the
transaction.
 Fitch Ratings, Moody's Investors Service and
Standard and Poor‟s have rated the Issue at
'BB-', „B1‟ and „B+' respectively.
Cont…

9. < Research & Development Unit >
Sri Lanka Raise USD 500 mn from Sovereign Bond
(cont…)
 The Issue was announced on April 7, 2014 with an initial price guidance of 5.50 % p.a. With the post
announcement interest from investors across Asia, Middle-East, Europe and the USA, Sri Lanka
priced the Issue at a yield of 5.125 %.
 The final order book stood at US$ 4.25 billion, an oversubscription ratio of 8.3 times, from 287
accounts, achieved within a six-hour bookbuild period.
 Distribution of investors was very well diversified, with Asia taking 32 %, Europe 22 % and the US at
46 %.
 Global Fund Managers were the largest investors in the transaction, representing 81 %, with Banks,
Private Banks and insurance agencies taking 13 %, 3 % and 3 % respectively.

10. < Research & Development Unit >
Sri Lankan Airlines goes for a
USD 150 mn Term Facility
 Standard Chartered has acted as the sole
structuring bank, joint mandated lead arranger,
account bank, agency and security trustee and
book-runner for a USD 150 mn equivalent multi-
currency senior secured Islamic structured term
financing facility for Sri Lankan Airlines.
 The facility is partially secured by a Government
guarantee with preferential access to the airlines
IATA receivables from a number of countries.
 “The proceeds of the facility will be used towards the refinancing of an existing
facility and provide additional capital to support the airlines re-fleeting exercise.

11. < Research & Development Unit >
External Sector Performance
January 2014
Category
January
2013
US$ mn
January
2014
US$ mn
Growth
January
(%)
Exports 728.7 898.0 23.2
Agricultural Products 167.0 203.2 21.6
Tea 101.0 116.1 14.9
Industrial Products 559.7 691.6 23.6
Textiles and Garments 333.9 412.0 23.4
Mineral Products 1.0 2.1 105.7
Imports 1,532.2 1,653.9 7.9
Consumer Goods 246.8 253.6 2.7
Intermediate Goods 844.7 1,033.2 22.3
Fuel 291.2 489.6 68.1
Investment Goods 440.2 366.3 -16.8
Deficit in the Trade Account -803.6 -755.9 -5.9
The EU and USA continued to be the major markets
for textiles and garments of Sri Lanka representing
around 85 % of total garment exports.
Earnings from gems grew substantially
by 93 %, year-on-year, to USD 21 mn.
Expenditure on fuel increased by 68.1 due to higher
import of crude oil (by 41.2 %), refined petroleum
products (by 85.4 %) and coal (by 79.4 %). The
increase in imports of refined petroleum products was
due to greater dependence on thermal power
generation as hydro power generation declined due to
the prevailing adverse weather conditions.
The country’s exports have kicked off 2014
with double-digit growth and, aided by a
slower improvement in imports, the trade
deficit saw a contraction in January.
Cont…

12. < Research & Development Unit >
External Sector Performance
January 2014 (cont…)
Cont…

13. < Research & Development Unit >
External Sector Performance
January 2014 (cont…)
 BOP: During the month of January 2014, the overall BOP is estimated to have recorded a surplus of
USD 733 mn.
 GOR: Sri Lanka‟s gross official reserves amounted to USD 8.0 bn by end January 2014. In terms of
months of imports, gross official reserves were equivalent to 5.3, at end January 2014.
 Tourism: Tourist arrivals grew at a rate of 32.6 % (y-o-y), to 146,575 in January 2014. Earnings from
tourism is estimated to have recorded a y-o-y growth of 32.2 %during January 2014 to USD161.2 mn,
compared to the earning of USD 122.0 mn during the corresponding month of 2013.
 Workers‟ Remittances : Workers‟ remittances increased by 10.6 %, y-o-y, to USD 555.5 mn in January
2014 from USD 502.3 mn in January 2013.
 FDI‟s: FDI inflows in 2013 amounted to USD 1,420 mn compared to USD 1,382 mn in 2012. In terms of
sector wise investments, infrastructure, manufacturing and services sectors received the highest
FDIs in 2013.

14. < Research & Development Unit >
Colombo Consumers Price Index,
March 2014
Month
CCPI (%) *CCPI Core (%)
Year on Year
(Y-o-Y)
Annual Average
(A.A)
Year on Year
(Y-o-Y)
Annual Average
(A.A)
Feb 14 4.2 6.0 3.1 3.8
Mar 14 4.2 5.7 3.4 3.5
*The price movement excluding Fresh Food, Energy, Transport, Rice and Coconut in the CCPI basket.
 Inflation, decelerated further to 5.7 % in March 2014, on an annual
average basis, from 6.0 % in February 2014. This declining trend has
been observed continuously since June 2013.
 Meanwhile, inflation on a year-on-year (YoY) basis remained at 4.2 % in
March 2014, which was the same rate recorded in the previous month.
 According to CBSL Inflation remained subdued in March 2014 mainly
due to low increase in prices of items in the Non-food category.

15. Analysis & Forecast

16. < Research & Development Unit >
ADB Outlook for Sri Lanka
 GDP: An improved external environment, higher investments, and a recovery in domestic
consumption will sustain a rapid pace of GDP growth in Sri Lanka in the next two years, according
to Asian Development Outlook 2014 (ADO).
 ADO forecasts growth to reach 7.5% in 2014 and remain at that level in 2015.
 “Sri Lanka‟s economic performance will further strengthen with the improvement in the external
environment over the next two years” according to ADB‟s Senior Country Economist for Sri Lanka,
Tadateru Hayashi.
 “Domestic conditions, with relatively low inflation, improving consumption demand, and a falling
fiscal deficit all augur well for a higher growth trajectory.”
 Sri Lanka‟s economy recorded 7.3% growth in 2013, supported by strengthening domestic demand
on an eased monetary policy and a pickup in exports and tourism. Faster growth in wholesale and
retail trade, hotels and restaurants, transport, banking, insurance and real estate lifted performance
in the large service sector providing the impetus for the rebound. Favorable weather helped
maintain agricultural growth.
Cont…

17. < Research & Development Unit >
ADB Outlook for Sri Lanka (cont…)
 Inflation: Inflation is expected to remain in the mid-single digits in 2014 and 2015. Broadly steady
international fuel and stable food prices assuming normal weather will help to keep inflation in check
over the next two years.
 External Sector: Exports are expected to strengthen with better economic performance in the European
Union and the US, Sri Lanka‟s main export destinations. After declining in 2013, imports will pick up in
2014 as domestic demand materializes.
 Workers‟ remittances expanded in 2013 as a result of an increased labor migration under the
professional and skilled category, the expansion of formal channels for remitting money, and the
introduction of a swift web-based money transfer system. Continued strong performance in remittances
will help contain the current account deficit at 2.6% and 3.5% in 2014 and 2015 respectively.
 Fiscal Sector: The fiscal deficit steadily shrank to 5.8% of GDP in 2013, from a peak of 9.9% in 2009.
However, while the government has reduced expenditures and attempted to improve revenues to narrow
the deficit, the revenue ratio did not pick up as expected. Better economic performance and more
imports are expected to catalyze higher revenue collection in 2014 and 2015. Continued policy action is
also needed, together with improved revenue administration, to achieve a higher revenue ratio.

18. The views expressed in Economic Capsule are not necessarily those of the Management of Commercial Bank of Ceylon PLC
The information contained in this presentation has been drawn from sources that we believe to be reliable. However, while we have taken reasonable care to maintain accuracy/completeness of the
information, it should be noted that Commercial Bank of Ceylon PLC and/or its employees should not be held responsible, for providing the information or for losses or damages, financial or otherwise,
suffered in consequence of using such information for whatever purpose.