Month: December 2011

After nearly nine years, all US Forces are mandated to withdraw from Iraqi territory by 31 December 2011 under the terms of a bilateral agreement signed in 2008. Now the job facing the war-torn country is to re-build its economy. On Tuesday, prime minister Nouri al-Maliki gave a presentation to more than 400 executives representing a wide range of industries including petroleum, engineering and construction, commercial aviation, architecture, maritime cargo and financial services; the leaders of American commerce and industry, to proclaim Iraq’s “limitless” opportunities “open for business” to American investors. He said that, “It is not now the generals but the businessmen and the corporations that are at the forefront” of Iraq’s future.

Maliki was basically playing the role of a salesman, pitching his country to “the West”. He announced that “circumstances (in the country) have improved because of better security,” yet still acknowledged the difficulties ahead of developing a market-based economy governed by transparency laws and international regulations after the planned and strictly controlled economy of Saddam Hussein. Thomas Nides, the Deputy Secretary of State, told CNN “Make no mistake, this is a country that’s developing, its commerce is developing, it’s going to take time, it’s going to take energy,” but, “U.S. companies are going there because they believe they can make money and at the end of the day that’s what it is about.”

For the first few months of 2011, as the war was slowing down and the forces were leaving the country in greater numbers, total foreign direct investment in Iraq reached $70 billion. The United States represented 11.6% with $8 billion of investment, up from nearly $2 billion in 2010. However Milaki has stated that “he is not satisfied with the number of US corporations in Iraq. All sectors of the economy are there, open for business, for American business.”

Despite all the desire for an increase in investment, Iraq has not previously been hospitable to US business offers. Two years ago the Iraqi government auctioned oil production contracts, but many members of Congress were outraged as not a single US energy firm secured a deal. Instead they were forced to watch as lucrative multi-billion-dollar contracts went to Russian and Chinese firms.

Iraq wants to try and diversify its economy to focus on financial, medical, agricultural, educational and infrastructural services, but oil still remains the dominant sector. The country boasts (mostly) untapped oil reserves of at least 115 billion barrels of oil, the fourth largest in the world, and therefore foreign oil companies have been chomping at the bit to return. Current output is about 2.5 million barrels per day, but according to OPEC could nearly be doubled by 2016.

Following times of conflict there generally dawns a period where those with the necessary resources can make billions. Iraq is just entering such a period and the government is actively searching for those people with the necessary resources. The IMF has already projected that the Iraqi economy could grow at a faster pace than China or India over the next two to three years. It is the perfect time to invest and help create a well balanced, modern country, as well as secure a stake in the worlds fourth largest oil reserves.

Source: http://oilprice.com/Finance/Economy/Iraq-An-Army-of-Soldiers-to-be-Replaced-by-an-Army-of-Businessmen.html

By. James Burgess of Oilprice.com

Canada has announced its intention to withdraw from the Kyoto treaty on greenhouse gas emissions (GGE), sandbagging the other signatories to the convention. The Kyoto protocol, initially adopted in Kyoto, Japan in 1997, was designed to combat global warming with the agreement allowing countries like China and India take voluntary, but non-binding steps to reduce their greenhouse gas carbon emissions.

International condemnation was swift.

China’s Foreign Ministry spokesman Liu Weimin said at a news briefing, “It is regrettable and flies in the face of the efforts of the international community for Canada to leave the Kyoto Protocol at a time when the Durban meeting, as everyone knows, made important progress by securing a second phase of commitment to the Protocol. We also hope that Canada will face up to its due responsibilities and duties, and continue abiding by its commitments, and take a positive, constructive attitude towards participating in international cooperation to respond to climate change.”

Xinhua, China’s state news agency, labeled Ottawa’s decision “preposterous, an excuse to shirk responsibility” and implored the Canadian government to reverse its decision so it could help reduce global emissions of GGEs.

Beijing’s comments are significant, not least because the PRC is currently the world’s biggest producer of GGEs after the U.S., but China has stalwartly insisted that the Kyoto Protocol remain the foundation of the world’s efforts to curb GGE emissions, which scientists maintain are a significant contributor to global warming. Pleading its special status as a developing nation China at the recently concluded climate change negotiations in Durban was granted an extension of the terms of implementing the Kyoto protocol until 2017 even as it bowed to pressure to launch later talks for a new pact to succeed the Kyoto protocol that would legally oblige all the big GGE producers to act.

Japan also expressed displeasure at the Canadian decision, but in a more nuanced approach, Japanese Environment Minister Goshi Hosono urged Canada to continue to support the Kyoto agreement, which included “important elements” that could help fight climate change.

UN climate chief Christiana Figueres opined in a statement released to the press, “I regret that Canada has announced it will withdraw and am surprised over its timing. Whether or not Canada is a party to the Kyoto Protocol, it has a legal obligation under the convention to reduce its emissions, and a moral obligation to itself and future generations to lead in the global effort.”

A spokesman for France’s Foreign Ministry called Canada’s decision “bad news for the fight against climate change.”

Even plucky Southern Pacific island nation Tuvalu weighed in with its lead negotiator Ian Fry bluntly stating in an e-mail to Reuters, “For a vulnerable country like Tuvalu, it’s an act of sabotage on our future. Withdrawing from the Kyoto Protocol is a reckless and totally irresponsible act.”

The silence from Washington on the issue was significant, as the United States Bush administration refused to sign the protocol, arguing instead that China and other big emerging emitters should come under a legally binding framework that does away with the either-or distinction between advanced and developing countries.

Toughing it out, Canadian Minister of the Environment Peter Kent stated that the protocol “does not represent a way forward,” adding that meeting Canada’s obligations under the Kyoto convention would cost $13.6 billion, asserting, “That’s $1,546 from every Canadian family – that’s the Kyoto cost to Canadians, that was the legacy of an incompetent Liberal government.”

Canada’s decision nevertheless has garnered a few supporters. Australian Minister of Climate Change Greg Combet has defended Canada’s decision, remarking, “The Canadian decision to withdraw from the protocol should not be used to suggest Canada does not intend to play its part in global efforts to tackle climate change.” One might note here that coal is Australia’s third largest export.

So, why the abrupt Canadian volte-face? Canada has the world’s third-largest oil reserves, more than 170 billion barrels and is the largest supplier of oil and natural gas to the U.S.

The answer may lie in Canada’s far north, in Alberta’s massive bitumen tar sands deposits, a resource that Ottawa has been desperate to develop. Since 1997 some of the world’s biggest energy producers have spent $120 billion in developing Canada’s oil tar sands, which would be at risk if Ottawa went green in sporting the Kyoto accords.

According to the Canadian Association of Petroleum Producers, more than 170 billion barrels of oil sands reserves now are considered economically viable for recovery using current technology. Current Canadian daily oil sands production is 1.5 million barrels per day (bpd), but Canadian boosters are optimistic that production can be ramped up to 3.7 million bpd by 2025.

So, what’s the problem?

Extracting oil from tar sands is an environmentally dirty process and the resultant fuel has a larger carbon footprint than petroleum derived from traditional fossil fuels, producing from 8 to 14 percent more CO2 emissions, depending on which scientific study you read.

So, Canada acceding to the Kyoto Treaty terms would effectively kill the burgeoning Canadian tar sands extraction industry. The Canadian tar sands already suffered a massive setback earlier this year when the Obama administration effectively sidelined the Keystone XL pipeline, which was due to transports tar oil production across the U.S. to refineries on the Gulf Coast.

So, Ottawa on the Kyoto convention has effectively drawn its line in the sand(s.)

Where things go from here is anyone’s guess.

Source: http://oilprice.com/Environment/Global-Warming/Startling-the-Global-Community-Canada-Withdraws-from-the-Kyoto-Convention.html

By. John C.K. Daly of Oilprice.com

By MoneyMorning.com.au

Diggers & Drillers editor, Dr Alex Cowie has just published a new presentation on where he sees the best investment opportunities for 2012.

As a follow up to the report, we cornered the Doc with some questions we had about the discoveries he’s made over the last 15 months… the bigger picture for commodities in the year ahead… and a few others to boot. Here’s what happened…

Money Weekend: Okay, straight up Alex. Why did you get told to “f*** off” by a copper mining executive?

Dr. Alex Cowie: I introduced myself at a conference and he told me to f*** off because I put a sell recommendation on his company. There’s not much good that can come from a conversation that starts like that. So I told him the conversation was over.

The share price of his company had fallen hard. I decided the time had come to take the loss and move on. This hadn’t pleased our friendly mining exec. But it was the right call – the stock has fallen much, much further since then.

The point is that I work for my readers. Not the mining companies.

My goal is to make money for readers. And if things aren’t going to plan, then I have to take the heat and make tough decisions. I can guarantee it’s no way to win a popularity contest. But the point is, it has saved readers from further losses time and time again.

I want to point out that I have a great deal of respect for the majority of the people in the mining sector. But there are a few rogues out there I can assure you, and I give them a wide berth. Most of them however are passionate, smart people who love their jobs. And getting on site or to conferences to meet them is the best part of my job.

MW: Right, it’s clear you prefer smaller sized companies at the riskier end of the ASX rather than safe blue-chips. Why is that? Wouldn’t it be best (and safer) for our readers to make money from the run-up in commodity prices just by buying BHP Billiton?

AC: Did you put the word ‘safe’ in the same sentence as ‘blue-chip’?

Have you seen Bluescope Steel [ASX:BSL] recently? That ‘safe blue-chip’ has lost 96% in the last 3 years. How about Energy Resources of Australia [ASX:ERA]? Down 95% in 2 years. APN New [ASX:APN] has wiped out 90%. That doesn’t sound safe to me.

As for BHP Billiton [ASX: BHP], investing in big mining companies is about as much fun as a root canal. Since the start of 2009, it’s gained 23%. Compare that to smaller iron stocks like Atlas [ASX:AGO], which has added 270%… or Flinders Mines [ASX:FMS] up 570% in the same timeframe.

The reason many fund managers invest in the blue-chips is because they have vast amounts of money to manage, the big stocks are the only ones large enough for them. Often they’re legally restricted to companies on the ASX200. With these stocks you can risk losing 30%, so you can have a crack at gaining 30%.

And take Australia’s biggest gold stock, Newcrest Mining [ASX: NSM]. Since April, it has fallen 22%. In the same time a South American gold explorer I tipped is up 66%.

Plus, there are around 800 small-cap mining stocks too small for the big players to touch. But this is a rich hunting ground for the everyday investor… if you’ve got some risk tolerance and patience. If you’re prepared to risk losing 30%, the stocks that do perform can often double or triple in price.

My job is to do filter out the duds and identify the stocks which have a real shot. First, I’m looking for companies exploring for, or producing, certain types of commodities. Then, I focus on the commodities that are set to keep rising in the next few years. But the list has gotten a lot shorter in the last six months. The chaos in Europe, a slowdown in China, and stagnating US economy are all making the fundamentals of many industrial commodities look very dodgy.

MW: Long time Money Morning readers know you’re a big fan of silver. And we know that’s a story you have your eye on for 2012. What other big resource trends do you see for the year ahead?

AC: I’ve got a few I’m watching this year. Palladium is a precious metal on my radar – a great deal of it comes from Russian stockpiles which are running out. This will cause a supply squeeze, and may trigger a price rally.

Potash and tungsten are other commodities I’ve backed since the start of the year. And I’m backing them again for 2012. They’re unlikely to be impacted by the global chaos as they’re too important to their end users. Potash is vital as a food fertiliser. And tungsten is used in military applications. Both commodities have risen steadily all year, and I don’t expect this to change.

Next year, I’ll focus more on changing geopolitical trends. China, in particular, is starting to throw its weight around. And the US is going head to head with it. We’ve had the currency war for years, now there’s a trade war stirring. This is a well-trodden path that leads to military brinkmanship. What we’re seeing has all the same signs as the lead up to the Cold War.

So, what I’ll ask next year is: What this means for Australia? And more specifically, what it means for the resources sector?

MW: You’ve closed out a number of winners ranging from 74% gains right up to 125%. But what about the losers? What’s your strategy for when a stock you recommend doesn’t perform as you expect?

AC: I always ask readers to decide their own sell level. Everyone has a different risk tolerance. For instance, you may say a 10% loss is as much as you can handle, so you decide in advance to sell if it falls that much.

Small-cap stocks can be notoriously volatile, meaning they can rise and fall wildly. If you’re used to seeing stocks move by 1 or 2%, it can be disconcerting when the price of a small-cap stock suddenly drops 20%. But this is exactly what can happen with many small-caps stocks that then go on to post gains of 100% or more.

I try to give stocks as much wiggle room as possible. However when a stock falls beyond an acceptable level, I email readers to let them know that it’s time to take the loss, recover their capital, and move on. I don’t publish this level, in order to encourage readers to choose their own risk level.

MW: Over the last year and a half you’ve hardly been in the office. You’ve been to countries like Botswana, Peru, Morocco, South Africa, Dominican Republic, the United States, Hong Kong… the list goes on. Not to mention just about every part of Australia. But what’s the real point in all this travel? Can’t you do all the research you need to from your desk here in Melbourne?

AC: In a word – No.

Put it this way. If you were internet dating, would you marry a person based on their internet profile alone? Ok. Bad example – plenty of people do that. But you get what I mean.

Staring at a screen can only get you so far. It’s my starting point to gather all the publically available information. But I back the people behind a project as much as the project itself. I spend a lot of time meeting with management. In fact, I’ve just caught up with two different companies just this morning [Friday]. I’ve had four coffees so far today – my hands are shaking!

I manage to get on site a great deal as well. What’s not to like about wandering around a wild part of Tasmania, Utah, Peru – wherever the project may be – and talking to interesting mining people? The real reason I go is to get the real story. Believe me when I say it’s helped Diggers & Drillers reader’s dodge a lot of bullets. I sleep well at night knowing I’ve done as much as I can to make sure I haven’t missed anything.

MW: Regular readers of Money Morning often hear us refer to you as “The Doc”. So let’s have it once and for all… what does the “Dr.” stand for?

AC: Early on in my life, I fulfilled a lifelong ambition of graduating as a Veterinarian. That took five years of intense study at the University of Liverpool in the UK. I then worked successfully as a Vet for ten years in seven different countries including UK, Australia, New Zealand, Kenya, Zimbabwe, Nepal and Thailand. This is where the Doctor comes from. I use it because I’ve earned it.

As an adult, my burning ambition became to work independently in the financial markets. People are always surprised when I tell the tale of my career change, but it was the best thing I ever did. The fact is that when it comes to being an analyst, I’ve found the scientific background to be excellent foundations for a career in finance. You need the ability to take on and process a huge amount of information when researching. Plus it prepared me for all the animals in the mining sector (joking).

As for the formal financial training, I completed a postgraduate Diploma in Applied Finance and Investment. I did this in my spare time years ago, and I recommend the course to anyone. I’m now currently halfway through a Masters degree in Finance, which I do on the side. I like learning and intend to make it a lifelong pursuit.

What I like about the markets is that they reward results, not training. And in that respect, I’ve found that having a methodical and scientific approach has been just as valuable in financial markets as it was at the clinic.

MW: Thank you Alex.

AC: No problem.

Shae Smith
Editor, Money Morning

P.S. With the recent sell-off in the gold price, now is a great time to top up on gold. And if Dr. Alex Cowie is right, it’s also a great time to stock up on cheap gold and silver stocks too. If you haven’t seen it yet, make sure you watch the Doc’s latest research presentation for what he says are the six best resource investments for 2012. Click here for details…

What are the Commodities You Need to Place on Your Watch List for 2012?

The past week in monetary policy saw interest rate decisions announced by 11 central banks.  Of those adjusting interest rates, all were reductions; Mozambique -100bps to 15.00%, Mauritius -10bps to 5.40%, Norway -50bps to 1.75%, and Denmark -10bps to 0.70%.  Meanwhile those that held interest rates unchanged were: US 0-0.25%, Hong Kong 0.50%, Chile 5.25%, Switzerland 0-0.25%, Sri Lanka 7.00%, India 8.50%, and Colombia 4.75%.  The US FOMC also announced no changes to its quantitative easing programs, and the Swiss National Bank maintained a strong stance on its exchange rate floor with the Euro.

Following are some of the key quotes from the central banks that announced monetary policy decisions over the past week:

• Reserve Bank of India (held rate at 8.50%): “On the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation.”
• Norges Bank (dropped rate 50bps to 1.75%): “The turbulence in financial markets has intensified and external growth is now expected to be clearly weaker, particularly in the euro area. In order to dampen the impact on the Norwegian economy, the Executive Board has decided to lower the key policy rate.”  The Bank further noted: In order to guard against an economic setback and even lower inflation, we are of the view that a reduction in the key policy rate is now appropriate.”
• Bank of Mauritius (cut rate 10bps to 5.40%): “The MPC observed a decline in externally-generated inflationary pressures…. The MPC is of the view that the Key Repo Rate is  broadly appropriate in view of the expected impact of the 2012 budget measures. However, to signal its concern about the low level of business and consumer confidence, it has decided to cut the Key Repo Rate by 10 basis points.”
• Banco Central de Chile (held rate at 5.25%): “Domestically, economic activity has evolved somewhat below projections, while domestic demand is still strong. Labor market conditions continue to be tight. Financial conditions are somewhat more constrained, reflecting the situation in global markets. Headline inflation has exceeded expectations somewhat, due to the incidence of fuels and foodstuffs. Core inflation figures remain contained. Inflation expectations are close to the target.”
• US Federal Reserve (held rate at 0-0.25%): “To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.”

Looking at the central bank calendar, there’s a couple more Europe area banks meeting which will be interesting in the sovereign debt crisis context, and the Bank of Japan may or may not be interesting. There’s also meeting minutes due from the RBA on Tuesday, and the Bank of England on Wednesday.

The Central Bank of Colombia held its monetary policy interest rate unchanged at 4.75%.  The Bank said [translated]: “the main risk to inflation coming from excessive expansion in demand or increases in cost overruns, with strong and lasting effects on expectations and credibility of monetary policy. In a longer time horizon, excessive credit growth and continued low interest rates could be a source of financial imbalances have negative consequences on the sustainability of economic growth. In accordance with this assessment of the balance of these risks, Board decided to keep interest rates unchanged.”

The Central Bank of Colombia hiked the rate 25 basis points at its last meeting, while its previous change was an increase of the interest rate by 25 basis points to 4.50% at its July monetary policy meeting this year, following a 25bp increase in June.  Colombia reported annual inflation of 3.96% in November, compared to 3.73% in September, 3.27% in August, 3.42% in July, 3.23% in June, 3.02% in May, and 2.84% in April; which compares to the Bank’s inflation target of 3% (+/- 1%).  Goldman Sachs had previously forecast 2011 GDP growth at 5.5%, while Morgan Stanley had forecast just 4.9% growth for the Colombian economy.  

The Reserve Bank of India [RBI] paused its repo rate at 8.50% and also held the reverse repo rate at 7.50%, and cash reserve ratio at 6 percent.  The RBI said: “On the domestic front, growth is clearly decelerating. This reflects the combined impact of several factors: the uncertain global environment, the cumulative impact of past monetary policy tightening and domestic policy uncertainties.Both inflation and inflation expectations are currently above the comfort level of the Reserve Bank. However, reassuringly, inflationary pressures are expected to abate in the coming months despite high crude oil prices and rupee depreciation. The growth deceleration is contributing to a decline in inflation momentum, which is also being helped by softening food inflation.”

The Reserve Bank of India increased the repo rate by 25 basis points at its October and September meetings, after hiking a surprise 50 basis points at its previous meeting to 8.00%, having increased 25 basis points in June, and 50 basis points during the May meeting.  India’s key inflation measure, the wholesale price index, increased 9.36% in October, compared to 9.72% in September, 9.78% in August, 9.22% in July, 9.44% in June, 9.06% in May, 8.66% in April, and 8.98% year on year in March, exceeding the Bank’s previous estimate of 8%.  

The Hong Kong Monetary Authority sustained its base interest rate unchanged at 0.50% following the decision of the US Federal Reserve to leave the fed funds rate unchanged at 0-0.25%.  The HKMA said in a report: “Worries about the global economic prospect have escalated over the past few months. The pace of recovery in the G2 economies has been much weaker than expected, triggering repeated downgrades of their output growth projections. Market confidence has also become fragile, following the downgrade of the US sovereign rating and the slow progress in resolving the intensifying debt crisis in the euro area.”

Where Are Oil Prices Going From Here?

by David Fessler, Investment U Senior Analyst
Friday, December 16, 2011

This past week, crude oil prices notched up their largest weekly drop since September. And now, nearly everyone is proclaiming the “oil sky is falling.”

If you listen to the news media, oil analysts and other so-called experts, you’ve recently heard things like this:

“Oil’s going to $80 a barrel… or below.”

“The world economy is grinding to a halt.”

“North Dakota is going to be the next OPEC.”

“We’re now exporting more oil than we’re importing.”

None of these statements are true, but they make great fodder for TV news junkies, and get investors to hit the sell button.

I really like the last one. I’ve had two of my colleagues tell me this one. I just smile, because it simply isn’t true. Not even close.

You see, they’re pointing to refined oil products, like gasoline and diesel. And in that context, it’s true that we’re currently importing a little less than we’re exporting.

Than makes for a flashy headline, and is sure to get their reader’s attention. But it really doesn’t tell the whole story. Far from it.

Here’s the really important statistic: Overall crude oil imports far outweigh crude oil exports. That won’t change in my lifetime, or yours. I don’t care how old you are. Are we producing more oil? You bet.

The Bakken, the Eagle Ford and Niobrara shale plays are all significantly contributing to America’s newfound wealth of extractable crude. But we’re not producing anywhere near enough to satisfy our daily demand for the black goo.

Here’s the real statistics, right from the Energy Information Administration. These figures are 2010 data, and haven’t significantly changed for 2011.

Total U.S. petroleum consumption? 19,148,000 barrels per day.

Total U.S. petroleum exports? 2,024,000 barrels per day.

Where I went to school, those numbers mean we’re importing 10 times more than we’re exporting. I’ll let you do your own math.

Perception is Everything When it Comes to Oil Prices

The real question is: Where are oil prices going from here? I maintain they’re still headed north. Nothing has changed, except perceptions. And changing your perception in the face of fundamental facts is a dangerous thing. Especially if you’re betting real money on stocks.

Today, for instance, oil is up. Why? Because the perception of just a little positive progress being made in Europe, or maybe just not as much negative news. When the Europeans finally do solve their issues – and they will – oil prices will be on the move up again.

Global growth isn’t stopping. It may be slowing down, but that just means the growth in the demand for oil will slow. It will still be growing, just not as fast. That’s an important point investors need to understand about oil.

Here in the United States, data suggests the economy continues to improve. The Institute for Supply Management’s Manufacturing Index rose to 52.7 percent in November. That’s up from 50.8 percent in October.

Any reading above 50 percent is viewed as economic expansion. The number has been above that important level for that last 28 months. That doesn’t sound recessionary to me.

And let’s keep in mind that while oil had a precipitous drop in the last week, it’s still up for the year. WTI crude oil is up about five percent and Brent is up nearly 15 percent from a year ago.

How Should Investors Play Oil Right Now?

If you already own oil stocks, consider adding to your position. Chances are they’re either below where you bought them originally, or much cheaper than they were last week.

If you’re thinking of starting a new position in companies like Anadarko Petroleum Corporation (NYSE: APC), BP plc (NYSE: BP), or Chevron Corporation (NYSE: CVX), right now might be a great time to do so.

Good Investing,

David Fessler

Article by Investment U

Dec. 16 (Bloomberg) — Bob Parker, senior adviser at Credit Suisse Asset Management, discusses stocks, euro-zone bonds, China and India. He talks with Owen Thomas on Bloomberg Television’s “Countdown.”

The Central Bank of Sri Lanka kept its benchmark repurchase rate steady at 7.00%, and also held the reverse repurchase rate at 8.50%, and the Statutory Reserve Ratio at 8%.  The Bank said: “While supply side improvements, particularly with respect to agricultural produce, have helped bring down domestic prices, the expected favourable performance of the domestic agricultural sector in the forthcoming year coupled with the ongoing improvements to infrastructure includingtransportation, will help mute inflationary pressures in the period ahead.”

Sri Lanka’s central bank also kept its monetary policy settings unchanged at its November meeting this year, while the Bank last cut its key interest rates in January this year.  Sri Lanka reported an annual headline inflation rate of 4.7% in November, down from 6.4% in September, 7% in August, 7.5% in July, 7.1% in June, and 8.2% in May.  

Sri Lanka is aiming for 8.5% GDP growth in 2011, after its economy expanded 8% in 2010, meanwhile inflation is expected to slow to 6% by the end of 2011.  Sri Lanka reported 8.2% annual GDP growth in the second quarter (7.9% in Q1).  

The Bank said broad money supply (M2) grew 19.8% year on year in October, while credit to the private sector grew 34.1%.  The Sri Lankan Rupee (LKR) last traded around 114 against the US dollar.  The Central Bank of Sri Lanka next meets on the 13th of January 2012.