By: Isuru Parakrama
March 02, Colombo (LNW): Sri Lanka’s foreign exchange earnings for January 2025 amounted to US$2,331 million, surpassing imports by a healthy US$546 million, according to the latest data released by the Central Bank of Sri Lanka (CBSL).
This represents a positive shift in the country’s external finances, as it continues to recover from previous economic challenges.
The total foreign exchange inflows for January included US$1,052 million from exports, US$573 million in worker remittances, and US$705.7 million from gross services, which also encompass an estimated US$400.7 million in earnings from the tourism sector.
In comparison, December 2024 saw total earnings of US$2,413 million, with exports contributing US$1,101 million and remittances reaching US$613 million.
Whilst the export figures showed a slight dip from December to January, the tourism industry continued to show strong performance, bolstered by a steady increase in foreign visitors.
The country’s IT and BPO services also performed well, generating US$68 million in January. However, services outflows amounted to US$287.4 million, with travel abroad accounting for US$52.4 million of this expenditure.
Tourism remains a vital contributor to Sri Lanka’s foreign exchange earnings, with total tourism revenues for 2024 reaching US$3,168 million, a significant rise of 50% from the previous year.
Meanwhile, travel abroad costs also surged to US$755 million, highlighting the growing movement of citizens abroad.
In terms of trade, Sri Lanka’s import of investment goods and base metals saw an increase, reaching US$389 million in January 2025, up from US$294 million in the same month the previous year.
This uptick is indicative of a rise in domestic investments, with private credit expanding and savings from remittances, exports, and tourism being channelled into local projects.
However, whilst the overall foreign exchange earnings are positive, there are concerns surrounding the country’s foreign reserves. The Central Bank has been under pressure to balance foreign exchange inflows with the repayment of maturing debts and building up reserves.
Experts have warned that if interest rates remain too low, there could be a surge in private credit, potentially undermining efforts to build reserves and making it more difficult to manage the country’s debt.
This scenario could lead to the depletion of reserves if money is printed to address short-term liquidity needs, with an increase in imports further exacerbating the situation.
In light of these challenges, the Central Bank’s decision to inject rupee reserves into banks in late 2024 in an attempt to boost credit has raised concerns amongst analysts.
Whilst such measures were intended to stimulate economic activity, they have led to a decrease in the country’s foreign reserves, which fell by US$26 million in January.
The outlook for Sri Lanka’s external finances remains mixed. Whilst foreign exchange earnings from exports, remittances, and tourism are contributing positively, the growing demand for imports, coupled with the pressure to manage debt repayments, presents ongoing challenges for the nation’s economic stability.
