as of June 2018. Private sector credit growth declined from high levels of 29% YoY in July 2016 to 15% YoY levels in 1Q2018. Given the changes taking place in the private credit space (i.e. the retail tilt), and provided the CBSL's recent policy rate cut in April 2018, credit growth may still continue to move either horizontally (i.e. at a 15% level) or continue to reduce slightly given anticipated near term inflationary pressures, as the consumption-led borrowings may also tend to decline on account of the anticipated reduction in near term disposable income. This will however not add any excessive upward pressures on interest rates (including 12-month T bill yields) especially during 2H2018E. As a result, 12-month Treasury bill yields may in fact slightly decline from its June 2018 --> 9.4% to 9% levels by end of 2018E. However, given the International Sovereign Bond (ISB) bullet payments >US$3bn p.a. commencing from 2019E may likely add some upward pressure on interest rates, resulting in the 12-month T bill yields rising to at least 10% by 30 June 2019. External sector Trade account issues In the recent past, the Sri Lankan Government has identified some key focal areas to address the external imbalances of the economy, especially with regard to reducing its high trade deficit (~15% of GDP for 2012) in order to make the economy comply with the Marshall–Lerner condition. Sri Lanka's oil import bill accounts for an estimated 27% of total imports while its pro-growth policies have resulted in an investment goods import component of 24% of total imports. These inelastic import components have led to Sri Lanka's Export goods price elasticity + Import goods price elasticity totalling less than 1, resulting in the country not complying with the Marshall–Lerner condition. Some of the suggested proposals include: Import substitution of investment goods and consumer goods Tax concessions towards value-added exports Negotiating longer credit periods for oil imports Allowing the external value of the currency to be determined by market forces (with minimal central bank intervention) Capital account Within the capital account, borrowings still account for a significant proportion as opposed to Foreign direct investments FDIs were estimated at ~US$800mn for FY2012 Overall balance (BOP) The economy ended with an overall positive balance of US$151mn for 2012 (vs. a US$1,061mn deficit in FY2011) Financial institutions The Central Bank of Sri Lanka is the monetary authority of Sri Lanka and was