Sri Lanka’s Services sector recorded notable net inflows in terms of earnings from tourism, sea transport, air transport, and computer and IT/BPO-related services.
The major outflows from the services sector in February 2024 were mainly attributed to air transport, sea transport, and technical, trade-related and other business services.
In addition, Computer and IT/BPO-related services were the major contributors to the inflows to the services sector in February 2024. Total services sector inflows (excluding earnings from tourism) were estimated at USD 247 million in February 2024, in comparison to USD 242 million in February 2023.
Workers’ remittances continued to record improvements on a year-on-year basis in February 2024 as well, amounting to USD 476 million in February 2024, in comparison to USD 407 million in February 2023 and USD 488 million in January 2024. In February 2024, foreign investment to the Colombo Stock Exchange (CSE) recorded the highest monthly net inflow since February 2022, while there was a net outflow from the government securities market.
Foreign investments in the government securities market recorded a net outflow of USD 68 million in February 2024 similar to the trend observed in recent months. Meanwhile, foreign inflows to the CSE, including both primary and secondary market transactions, amounted to USD 42 million in February 2024, which is the highest monthly net inflow since February 2022. This increase in inflow was due to a large inflow of US dollars 46 million to the primary market, mainly in the form of private placements, while the secondary market recorded a net outflow of USD 4 million during the month.
Meanwhile, Gross Official Reserves stood at USD 4.5 billion by the end of February 2024 and the Sri Lanka rupee appreciated by 7.6 per cent against the US dollar during the year up to 28 March 2024.
The deficit in the merchandise trade account widened to USD 319 million in February 2024 from USD 39 million recorded in February 2023, mainly with a higher increase in imports than the increase in exports.
Earnings from merchandise exports increased by 7.9 % to USD 1,059 million in February 2024 compared to US dollars 982 million in February 2023.
Expenditure on merchandise imports recorded an increase of 35% to USD 1,378 million in February 2024 compared to a significantly lower base of USD 1,021 million in February 2023.
SL rupee continues to appreciate
The Sri Lanka rupee appreciated by 7.6% against the US dollar during the year up to March 28, 2024. Meanwhile, reflecting cross-currency movements, the Sri Lanka rupee appreciated against other major currencies, such as the Euro, the Pound Sterling, the Japanese Yen, the Indian rupee, and the Australian dollar during the year up to March 28, 2024.
In line with the nominal appreciation, the real effective exchange rate (REER 24) also appreciated during February 2024. However, the index of REER 24 remained well below the threshold of 100 index points, indicating the maintenance of external competitiveness.
