The central bank said the trade deficit decreased notably during the five months ending in May with a significant decrease in merchandise imports, despite some setbacks in merchandise exports, reflecting the moderation of global demand.
According to the statement, the liquidity conditions in the domestic foreign exchange market continued to improve in recent months supported by increased forex inflows.
Earnings from tourism as well as workers' remittances are expected to have increased substantially during the first half of 2023, compared to the corresponding period of 2022 and this momentum is expected to continue going forward, said the central bank.
A notable increase in net foreign investment inflows was recorded in the government securities market, said the central bank.
It said the government received funds from multilateral agencies for budget support and further inflows are expected during the remainder of the year.
With improved forex flows and market sentiments, the Sri Lankan rupee appreciated by around 19 percent against the U.S. dollar thus far during the year, said the central bank.
The central bank said it was also able to accumulate a sizeable amount of foreign exchange from the domestic foreign exchange market.
Sri Lanka suffered a shortage of foreign exchange with its official reserve assets standing at around 1.8 billion dollars in April 2022 when the country announced the suspension of foreign debt repayments.
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