Merchandise exports recovered in December 2020 from the impact of the second wave of the COVID-19 pandemic in the country, while merchandise imports continued to decline on a year-on-year basis supported by the continuation of restrictions on non-essential imports and comparatively low global oil prices.

Overall, the trade deficit contracted significantly by US dollars 2.0 billion in 2020 compared to 2019. Recording the historically highest monthly inflow, workers’ remittances continued to support the external sector resilience in December 2020 as well. In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in December 2020.

At the end of the year, gross official reserves stood at US dollars 5.7 billion. During 2020, the Sri Lankan rupee depreciated by 2.6 per cent in 2020. The exchange rate experienced some volatility in December 2020 as well as during the period thus far in 2021.