The external sector exhibited a significant improvement in October 2017, with a notable decline in the trade deficit and continued inflows to the financial account of the Balance of Payment (BOP). Higher export earnings, which recorded a double digit growth for the fourth consecutive month, and a deceleration in import expenditure resulted in a significant year-on-year decline in the trade deficit in October. However, earnings from tourism increased moderately, while workers’ remittances further declined, owing to adverse economic and geopolitical conditions prevailing in the Middle Eastern region. Inflows to the financial account of the BOP continued during the month amidst increased foreign investments in the Colombo Stock Exchange (CSE) and the government securities market. Reflecting these developments, the BOP recorded an overall surplus of around US dollars 2.0 billion by end October 2017. Meanwhile, the level of gross official reserves increased to US dollars 7.5 billion at end October 2017, particularly with the absorption of foreign currency liquidity from the domestic foreign exchange market by the Central Bank.

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