The external sector recovered further in July 2020 supported by an increase in merchandise exports and increased workers’ remittances amidst reduced merchandise imports.
Several notable achievements were observed in spite of the Covid-19 pandemic. Earnings from merchandise exports surpassed US $ 1 billion in July for the first time since January 2020 and recorded a positive year-on-year growth for the first time since February 2020.
Merchandise imports remained subdued with the continuation of restrictions imposed on the importation of non essential goods. A substantial increase was observed in workers’ remittances in July 2020, recording the highest amount of monthly remittances since January 2018.
The level of gross official reserves of the country increased to US dollars 7.1 billion by end July 2020 with the receipt of the SAARCFINANCE swap facility from the Reserve Bank of India. Net inflows to the domestic foreign exchange market eased the pressure on the exchange rate and enabled the Central Bank to absorb foreign exchange on a net basis to build up gross official reserves.
Foreign outflows from the government securities market and the Colombo Stock Exchange (CSE) continued during the month, though at relatively low levels. The Sri Lankan rupee recorded a marginal appreciation during the month of July 2020.
The deficit in the trade account narrowed by US dollars 509 million in July 2020 to US dollars 209 million, from US dollars 717 million in July 2019, as exports increased while imports recorded a decline. Also, on a cumulative basis, the trade deficit narrowed by US dollars 844 million to US dollars 3,470 million during the period January-July 2020 from US dollars 4,314 million in the corresponding period of 2019.