By: Staff Writer
December 02, Colombo (LNW): Sri Lanka’s external sector continued its positive trajectory in October 2024, driven by significant current account inflows, leading to a rise in foreign reserves and the rupee’s appreciation, the Central Bank reported.
Exports saw a 24% year-on-year (YoY) increase, surpassing $1 billion, while the trade deficit narrowed, thanks to robust export performance.
The financial account of the Balance of Payments (BOP) also strengthened, supported by higher foreign inflows to the Colombo Stock Exchange (CSE) and the government securities market. By the end of October 2024, the overall balance recorded a surplus of $2.8 billion.
Merchandise trade deficit narrowed to $544 million in October 2024, down from $683 million in the same month last year. However, the cumulative trade deficit for January to October widened to $4.75 billion from $4.02 billion in 2023.
Export earnings increased to $1.16 billion, primarily driven by industrial goods like garments and petroleum products, though there were declines in gems and machinery exports. Agricultural exports also rose, especially tea, spices, and coconut products.
Merchandise imports rose by 5.7% YoY to $1.7 billion in October 2024, mainly due to higher expenditure on consumer and investment goods, while imports of intermediate goods declined.
Consumer goods imports increased by 10.8% YoY to $291.9 million, driven by higher food and home appliance imports.
On the other hand, intermediate goods imports decreased by 0.6% YoY to $1.08 billion, mainly due to reduced fuel imports. Investment goods imports increased by 27.5% YoY, reaching $330.4 million, driven by higher machinery and equipment imports.
The terms of trade, which measure the price ratio of exports to imports, improved by 1.8% YoY, as import prices fell more than export prices.
The export volume index rose by 31.7%, while the unit value index declined by 5.3%, indicating that increased export earnings were largely due to higher volumes. Similarly, import expenditure rose due to a 13.6% increase in import volumes, despite a 6.9% fall in prices.
In the services sector, total inflows, excluding tourism, reached $320 million in October 2024, up from $308 million in 2023, with sea transport and IT services contributing the most. Services sector outflows increased to $284 million, compared to $171 million in October 2023, with overseas travel and sea transport being major contributors.
Foreign investments in government securities saw a net inflow of $39 million in October 2024, the first monthly inflow in 2024. Cumulative foreign investments in government securities recorded a net outflow of $218 million during January-October 2024. Meanwhile, the CSE saw a net inflow of $3 million in October, with a cumulative inflow of $46 million for the year.
Sri Lanka’s Gross Official Reserves (GOR) rose to $6.5 billion by the end of October 2024, up from $6 billion at the end of September, mainly due to foreign exchange purchases by the Central Bank and funds from the World Bank and Asian Development Bank. By the end of October, GOR covered 4.2 months of imports.
The Sri Lankan rupee appreciated by 11.3% against the US dollar by November 29, 2024, and strengthened against other major currencies. The Real Effective Exchange Rate (REER 24) also increased, indicating reduced external competitiveness.
