ECONOMYNEXT – Sri Lanka’s current dollar inflows from exports, remittances, tourism and other services exceeded imports was 2.2 billion US dollars in April 2025, exceeding imports by 531 million dollars, official data shows.
Earnings from merchandise exports were 968.4 million US dollars, which usually falls in April due to holidays and down from a March surge of 1.24 billion dollars, remittances were 646.1 million dollars, gross services including tourism was 602.5 million US dollars.
RELATED : Sri Lanka foreign exchange earnings hit US$2.6bn in March, $963mn above imports
Out of services, tourism inflows were estimated at 256.7 million US dollars, and travel abroad by Sri Lankans were 54.1 million US dollars.
IT/BPO services were estimated to have earned 61.6 million US dollars, down 12.9 percent.
With a new service tax being imposed on services, including by freelancers and professionals under an International Monetary Fund, there is now a strong incentive to park such funds abroad.
Goods imports were 1.68 billion US dollars, around the same as 1,637 million US dollars in March with vehicle imports and investment goods going up.
Capital goods imports go up as private investment credit goes up with savings being pumped back into the economy by the banking system.
The excess of current inflows over imports have to finance interest payments (primary income account) and also debt repayments.
The primary income account was in deficit by 107 million dollars with 190 million dollars of outflows and 83 million dollars of inflows.
If the central bank cuts rates and the interest rate structure is too low, reserves may be run down to repay debt as private credit expands, regardless of whether credit to the government reduces due to better budgeting.
If the central bank prints money to keep rates down (inflationary policy) through open market operations, reserves will be run down not only to repay debt but also to pay for private imports.
In order to repay debt, the central bank has to run deflationary policy at a rate of interest that generates sufficient foreign reserves, by narrowing the current account deficit or widening the current account surplus.
The current account was 175 million US dollars in surplus, indicating that there were net outflows in the financial account, which is equal to ‘capital flight’ in common parlance or being a ‘creditor nation’.
After a rate cut in May and also the single policy rate earlier, which undermines interbank market activity and a scarce reserve system, there have been concerns over reserve collections and debt repayments.
Reserves were down 203 million dollars in April.
(Colombo/May31/2025)
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