Earnings from exports increased in July 2022, while import expenditure declined for the fifth consecutive month, on a year-on-year basis, the Central Bank of Sri Lanka (CBSL) reported.
The CBSL said the notable decline in import expenditure in July 2022 reflected the impact of overall moderation of activity amidst forex liquidity strains in the banking system, while the policy measures to curtail non-urgent import expenditure also helped to contain import demand pressures.
As a result, the trade deficit recorded a notable contraction in July 2022 over the year, thereby easing stresses in the domestic foreign exchange market.
Workers’ remittances increased marginally in July 2022, compared to June 2022, and remained in excess of the trade deficit, thereby supporting the forex liquidity conditions under severe balance of payments pressures.
The CBSL said earnings from tourism recorded an increase in July 2022 (year-on-year) on the low base.
Foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded a marginal net inflow during July 2022.
The Central Bank said gross official reserves stood at US dollars 1.8 billion as of the end of July 2022.
This included the swap facility from the People’s Bank of China, equivalent to around US dollars 1.5 billion, which is subject to conditionalities on usability.
The Central Bank said it continued to supply forex liquidity to finance essential imports by utilizing inflows to gross official reserves.
Consequently, the level of usable reserves continues to remain at a significantly low level by end of July 2022.
The bank added that total foreign assets, which consist of gross official reserves and gross foreign assets of the banking sector, amounted to US dollars 5.9 billion at the end of July 2022.
Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 361 per US dollar during the month.
Download report: External Sector Performance_July 2022 (NewsWire)