Lately released external sector data highlights that, Sri Lanka’s external sector recorded a moderate performance in July 2018. The trade deficit continued to widen in July 2018 (year-on-year) with higher import expenditure despite export earnings surpassing US dollars 1 billion during the month. Earnings from tourism recorded a modest growth while workers’ remittances declined marginally, on a year-on-year basis, during the month. The financial account recorded moderate inflows during July, while requirements of debt servicing and other outflows resulted in a decline in gross official reserves to US dollars 8.4 billion as at end July 2018. The foreign exchange market continued to be under pressure with outflows of foreign investments from the government securities market and increased foreign exchange demand for imports thus necessitating intervention by the Central Bank to curtail intraday excess volatility in the exchange rate.

The deficit in the trade account continued to expand in July 2018 in comparison to July 2017 due to higher growth in imports. On a cumulative basis, the deficit in the trade account widened considerably during the first seven months of 2018 in comparison to the corresponding period of 2017