SL’s usable forex reserves down to less than $500 m in June 2022

Sri Lanka’s usable foreign reserves is continuing to drop sharply and in June 2022 was recorded at less than US$500 million – hardly enough for a month of imports, according to Central Bank data released on Sunday.

While gross official reserves stood at $1.9 billion as at end June 2022, this includes the swap facility from the People’s Bank of China, equivalent to around $1.5 billion which is subject to conditionalities on usability. “The level of usable reserves continues to remain at a significantly low level by end of June 2022,” the Central Bank said in a statement.

However the merchandise trade balance recorded a surplus in June 2022 for the first time since August 2002, reflecting the impact of historically high monthly export earnings and the continued decline in import expenditure.

Earnings from tourism recorded an increase in June 2022 (year-on-year) from the low base, despite the negative sentiments associated with travel advisories and the ongoing shortage of fuel and resultant transportation difficulties. Workers’ remittances moderated in June 2022, compared to May 2022, reflecting an increase of grey (unofficial) market activity of foreign exchange transactions.

The balance in the merchandise trade account in June 2022 recorded a surplus of $21 million, compared to a deficit of $652 million recorded in June 2021, and for the first time since August 2002, where a trade surplus of $110 million was recorded, the statement said.

The cumulative deficit in the trade account during January-June 2022 narrowed to $3,514 million from $4,316 million recorded over the same period in 2021.

Earnings from merchandise exports in June 2022 increased by 23.9 per cent over the corresponding month in 2021, recording $1,248 million, which is the highest ever monthly export earnings recorded. Cumulative export earnings from January to June 2022 also increased by 14.3 per cent over the same period in the last year, amounting to $6,514 million.

Workers’ remittances moderated to $274 million during June 2022, in comparison to $304 million in the previous month and $478 million in the corresponding month in the previous year. Total departures for foreign employment were recorded at 26,944 during the month of June 2022, a notable increase compared to 22,194 during May 2022.

Total departures for foreign employment during January-June 2022 were recorded at 140,701, compared to 30,757 in the corresponding period of the previous year and 117,952 in 2021.

Tourist arrivals rose in June 2022 to 32,856, from 30,207 arrivals recorded in May 2022. Earnings from tourism in the month of June 2022 are estimated at $59 million, in comparison to $54 million in the previous month and $4 million in the corresponding month in the previous year.