Emerging Markets Rates and Currencies Handbook

Sri Lanka (LKR - Sri Lankan Rupee) Citi in Sri Lanka Citi has been present in Sri Lanka since 1979. Citi Sri Lanka is a one branch operation with just below 100 employees. Citi in Sri Lanka operates across the Institutional Clients Group (ICG) supporting global multinational companies, large Sri Lankan corporates, financial customers and public sector clients with award-winning cash management, trade services and direct custody and clearing solutions, as well as FX and lending. Citi has a well-developed Financial Institutions business supporting the cross-border transactions of nationalized and private sector banks in the country. Citi's Corporate Bank serves local corporates and multinationals across several industries, providing vital linkage and an integrated perspective throughout Sri Lanka supply chain and business operations. Market Overview Sri Lanka currently ensures price stability with an inflation target between 4-6% via the Central Bank of Sri Lanka along with sound supervision of the financial sector. Currently, monetary policies are tailored towards a low interest rate regime, along with a blend of Modern Monetary Theory (MMT). Interest rates are kept in line through yield curve control, and quantitative easing is pursued in the absence of sufficient credit appetite. Fiscal policies are also currently tailored to be expansionary, with increased spending allocations on infrastructure and public spending, along with a focus on facilitating sustainable export concentrated industries. Currently monetary policy is controlled primarily via the Policy Rate, which entails secured lending and borrowing by the Central Bank, the Bank Rate, which involves unsecured lending and borrowing by the Central Bank, the Statutory Reserve Ratio as well as Open Market Operations in Repos and Reverse Repos. Other secondary tools currently used include yield curve control and Open Market Operations in FX Swaps. The Central Bank maintains a soft peg on the Foreign Exchange Rate, not allowing for undue fluctuations against the US Dollar. Convertibility 48