By: Staff Writer
October 01, Colombo (LNW): Sri Lanka’s external sector exhibited a positive trajectory in August 2024, marked by significant inflows from workers’ remittances and increased exports, despite a dip in tourist earnings compared to the previous month, according to the Central Bank’s report. However, the merchandise trade deficit expanded year-on-year (YoY) when compared to August 2023 but showed improvement relative to July 2024.
Key Developments in the Services Sector and Workers’ Remittances
Services sector inflows, excluding tourist earnings, reached USD 327 million in August 2024, up from USD 306 million in August 2023. Workers’ remittances provided a robust boost, totaling USD 4,288 million during the period from January to August 2024, compared to USD 3,863 million in the same timeframe in 2023. This continued growth highlights the resilience of remittances as a key source of foreign exchange for the country.
Tourist Earnings Slow Down, But Still Strong Overall
Although there was a slowdown in tourist earnings in August 2024 compared to the previous month, the sector still performed well. Tourist earnings for the first eight months of 2024 amounted to USD 2,167 million, a significant rise compared to the USD 1,304 million recorded in the corresponding period in 2023. This increase reflects the recovery of the tourism industry despite short-term fluctuations.
Trade Deficit Worsens Year-on-Year
The merchandise trade deficit expanded to USD 430 million in August 2024, compared to USD 307 million in August 2023. The widening of the trade gap was driven by a substantial increase in import expenditures. However, the deficit narrowed when compared to July 2024. Cumulatively, the trade deficit from January to August 2024 reached USD 3,573 million, higher than the USD 2,964 million recorded during the same period in 2023.
Export Performance: A Bright Spot
Earnings from merchandise exports rose by 9.5% YoY to USD 1,224 million in August 2024, marking the highest monthly earnings so far in 2024. Industrial exports, particularly textiles and garments, led this growth, with textiles alone bringing in USD 512 million, the highest since August 2022. Petroleum products and rubber goods also saw significant gains. Agricultural exports were bolstered by tea and coconut-related products, although minor agricultural exports declined. Mineral exports also contributed to the positive export performance.
Import Expenditures Surge
Merchandise import expenditures grew by 16.0% YoY to USD 1,654 million in August 2024, driven by an increase in intermediate and consumer goods imports. Higher imports of textiles, wheat, and chemical products were key contributors, along with a rise in the volume of refined petroleum imports. In contrast, investment goods imports fell, particularly in machinery and equipment.
Conclusion: Mixed Trends Amid Economic Recovery
Overall, Sri Lanka’s external sector continues to recover with strong export growth and remittances, although the expanding trade deficit and volatile tourist earnings pose challenges. Despite these headwinds, the country’s foreign reserves stood at USD 6 billion at the end of August 2024, reflecting a stable external position.
