The Central Bank of Sri Lanka Releases 2024 Financial Stability Review

1. The overall stabilization and gradual improvement of domestic macro-financial conditions eased the pressure on the balance sheets of households and institutions to some extent and thereby lessened the risks faced by the financial sector. 

2. The downward rigidity in market interest rates coupled with declining yet elevated yields of government securities also hampered the progress of financial intermediation. 

3. Financial markets operated with improved stability during the period under review. 

4. The stock market depicted mixed performance in terms of key indicators.

5. Yields of government securities started to increase in August 2024. 

6. The rupee appreciated against the USD during the first eight months of 2024 within the domestic foreign exchange market, supported by enhanced inflows, particularly in the form of higher workers’ remittances, tourist earnings, and export conversions.   

7. The resilience of financial institutions gradually improved during the first half of 2024 amidst easing macroeconomic conditions, as reflected by key financial soundness indicators of the banking sector, such as credit quality, liquidity, and capital adequacy.

8. Credit growth of the banking sector witnessed a resurgence, particularly in terms of the private sector, while the dependence of state-owned enterprises declined mainly due to the central government absorbing certain credit facilities of a major state-owned enterprise.

9. The performance of both the finance companies sector and the insurance sector depicted an overall trend consistent with that of the banking sector, highlighting the impact of improved macro-financial conditions within the financial sector as a whole.