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The Role of the Central Bank’s Policies
The Central Bank has followed a deflationary policy since 2022, aiming to reduce inflation by allowing the Sri Lankan rupee to strengthen. This has led to positive effects on the EPF, as the value of savings in rupees has increased. The Central Bank's inflation target for 2025 is set at 5%, though it could go as high as 7%. Some people are worried that this could lead to higher food prices, affecting daily life, especially for retirees.
Why Real Returns Are So High
In 2024, the real return (the return after adjusting for inflation) on EPF balances reached 12.7%, the highest in recent years. This is an improvement from 9% in 2023. T
he main reason behind this increase is the combination of the rupee strengthening and falling global commodity prices, which helped reduce the cost of living.
Investments in Government and Shares Helped EPF Grow
The EPF invests mostly in government securities, but also has some money in the stock market. In 2024, the fund made a profit of 49.2 billion rupees from shares, more than double the 23.8 billion rupees made in 2023. This mix of safe government investments and potentially higher-earning shares has helped the EPF grow its funds, even when other parts of the economy were struggling.
Looking Ahead: Inflation Could Rise Again
While the EPF has done well in recent years, there are concerns about what will happen in 2025. The Central Bank is aiming for an inflation rate of 5%, which could push up the prices of food and other essentials. If inflation goes up, it could reduce the real value of EPF balances over time.
What This Means for EPF Members
For now, EPF members have seen strong growth in their savings, thanks to high real returns and a stronger rupee. However, the outlook for the future is uncertain. If inflation rises, it might affect how much you can buy with your EPF money, especially for those living on fixed incomes.
The EPF has delivered great returns for its members recently, thanks to deflationary policies and strong investments. But with the Central Bank planning to target higher inflation in 2025, it’s important for members to keep an eye on how these changes may impact their savings. It’s always a good idea to stay informed about the economy and make sure your retirement plans are on track, especially as inflation may increase in the future.
Sri Lanka’s Employees Provident Fund Delivers Strong Returns Amid Economic Changes
Sri Lanka’s Employees Provident Fund (EPF), which is managed by the Central Bank, has recently paid its highest real returns in many years. In 2024, the EPF declared an 11% interest rate on member balances, following a 13% return in 2023. Despite inflation being at 4% in 2023, inflation dropped to -1.7% in 2024, thanks to the Central Bank's policies which led to the rupee appreciating against foreign currencies.
The Role of the Central Bank’s Policies
The Central Bank has followed a deflationary policy since 2022, aiming to reduce inflation by allowing the Sri Lankan rupee to strengthen. This has led to positive effects on the EPF, as the value of savings in rupees has increased. The Central Bank's inflation target for 2025 is set at 5%, though it could go as high as 7%. Some people are worried that this could lead to higher food prices, affecting daily life, especially for retirees.
Why Real Returns Are So High
In 2024, the real return (the return after adjusting for inflation) on EPF balances reached 12.7%, the highest in recent years. This is an improvement from 9% in 2023. The main reason behind this increase is the combination of the rupee strengthening and falling global commodity prices, which helped reduce the cost of living.
Investments in Government and Shares Helped EPF Grow
The EPF invests mostly in government securities, but also has some money in the stock market. In 2024, the fund made a profit of 49.2 billion rupees from shares, more than double the 23.8 billion rupees made in 2023. This mix of safe government investments and potentially higher-earning shares has helped the EPF grow its funds, even when other parts of the economy were struggling.
Looking Ahead: Inflation Could Rise Again
While the EPF has done well in recent years, there are concerns about what will happen in 2025. The Central Bank is aiming for an inflation rate of 5%, which could push up the prices of food and other essentials. If inflation goes up, it could reduce the real value of EPF balances over time.
What This Means for EPF Members
For now, EPF members have seen strong growth in their savings, thanks to high real returns and a stronger rupee. However, the outlook for the future is uncertain. If inflation rises, it might affect how much you can buy with your EPF money, especially for those living on fixed incomes.
Stay Informed
The EPF has delivered great returns for its members recently, thanks to deflationary policies and strong investments. But with the Central Bank planning to target higher inflation in 2025, it’s important for members to keep an eye on how these changes may impact their savings. It’s always a good idea to stay informed about the economy and make sure your retirement plans are on track, especially as inflation may increase in the future.