External sector continues positive momentum in August 2024

The external sector continued the positive momentum in August 2024 with robust inflows of workers’ remittances and a notable increase in exports, despite a slowdown in tourist earnings compared to the previous month, the Central Bank said.

Workers’ remittances increased to USD 4,288 mn during Jan.-Aug. 2024 compared to USD 3,863 mn in the corresponding period in 2023. Workers’ remittances amounted to USD 577 million in August 2024 in comparison to USD 499 million recorded in August 2023. Monthly workers’ remittances exceeded USD 500 million consecutively for six months since March 2024.

Gross Official Reserves (GOR) improved to USD 6 billion at end August 2024 compared to USD 4.4 billion at end December 2023. This includes the swap facility from the People’s Bank of China (PBOC), which is subject to conditionalities on usability.

Net purchases of foreign exchange from the domestic foreign exchange market by the Central Bank amounted to US dollars 149 million (based on trade date) in August 2024. Meanwhile, import coverage of GOR (including the PBOC swap) amounted to 4.0 months of imports as at end August 2024.

Tourist Earnings were estimated at USD 2,167 mn during Jan-Aug 2024 compared to USD 1,304 mn during Jan-Aug 2023. Foreign investments in CSE continued to record a net inflow in August 2024. The merchandise trade deficit widened in August 2024 compared to August 2023, although it narrowed compared to July 2024. Services sector inflows (excluding tourist earnings) amounted to USD 327 mn in August 2024 compared to USD 306 mn in August 2023. Earnings from merchandise exports recorded an increase of 9.5 per cent (y-o-y) to US dollars 1,224 million in August 2024, recording the highest monthly earnings thus far in 2024. The increase was broad-based, with industrial exports making the largest contribution.

Sea transport services and computer & IT/BPO related services were the main contributors to the recorded inflows in the services sector excluding earnings from tourism in August 2024. The exchange rate, which exhibited some volatility with depreciation pressures during mid-month, demonstrated an appreciation in the latter part of September 2024.

The Sri Lanka rupee recorded an appreciation for the month of September 2024 while an overall appreciation trend was observed during the year and the Sri Lanka rupee appreciated by 8.2 percent against the US dollar during the year up to September 30, 2024.