The ongoing recovery in the tourism sector as well as the performance of exports provide some confidence of a speedy recovery, with the support of actions taken by the sectoral authorities, as well overall fiscal and monetary policies.
Narrowing trade deficit amidst a challenging global climate The continued growth of exports along with the sharp decline in imports led to a further contraction in the trade deficit during the first four months of 2019.
In relation to other inflows to the current account, earnings from tourism suffered a setback following the April terror attacks, while inflows from workers’ remittances remained moderate. In the meantime, the successful issuance of the International Sovereign Bonds (ISBs) in June 2019 reflected investors’ continued confidence on Sri Lanka’s medium term growth prospects.
Following the receipt of the proceeds of the ISBs, gross official reserves reached US dollars 8.9 billion by end June 2019, which provide an import cover of 5.1 months, Central Bank said.
The contraction in the trade deficit and the receipt of the proceeds from the ISBs, along with the continuation of the Extended Fund Facility Programme with the International Monetary Fund (IMF-EFF) eased the pressure on the exchange rate, CB said.
It has resulted in the Sri Lankan rupee recording a cumulative appreciation of 4.1 per cent against the US dollar thus far in 2019. This appreciation of the rupee has partially corrected its sharp depreciation observed in late 2018.