Sri Lanka’s external sector demonstrated an improvement in January 2018 with higher inflows to the financial account in spite of the widening of the trade deficit. While earnings from merchandise exports increased, expenditure on imports also increased significantly outweighing the performance in export earnings during the month. Nevertheless, reversing the moderating trend observed during the last year, tourist earnings recorded a notable growth during January 2018. Workers’ remittances, which marked a set-back in 2017, also recorded a considerable growth on a year-on-year basis in January 2018. Meanwhile, the financial account of the Balance of Payments (BOP) continued to experience higher inflows in January 2018, with foreign investments in the government securities market and the Colombo Stock Exchange (CSE). At the end of January 2018, gross official reserves of the country amounted to US dollars 7.7 billion, equivalent to 4.3 months of imports. Meanwhile, reflecting the developments in the domestic foreign exchange market, the Sri Lankan rupee depreciated by 0.6 per cent against the US dollar in January 2018 and by 2.0 per cent so far during the year up to 5 April 2018. 

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