ECONOMYNEXT – Sri Lanka’s current foreign exchange earnings made up of exports, remittances and gross services which includes tourism, totaled 2,265 million dollars in February 2025, exceeding imports by 701 million US dollars, central bank data shows.
Exports were 1,052 million US dollars, remittances were 548.1 million dollars, gross services were 664.5 million dollars.
Total current foreign exchange earnings were 138 million dollars or 6.4 percent higher in February 2025 from a year ago.
Among gross services inflows were 367 million US dollars of tourism earnings which is based on a tourist promotions office survey.
Tourist earnings boost spending power of sector workers from around November to February which can increase imports.
Outward tourism was around 78 million US dollars in February 2025, up from 57 million US dollars last year.
Since Sri Lanka has a high savings rate of around 30 percent of GDP, all current earnings do not turn into outflows unless there was credit.
Sri Lanka also has to pay interest on government borrowings from current inflows and build reserves, using the savings and other capital account inflows, if any.
Sri Lanka has to build reserves under an IMF program, which is generally expected to be done with current inflows.
However, to do that, the central bank has to avoid cutting rates with printed money (inflationary open market operations), and balance domestic credit.
Any central bank re-financed credit from inflationary open market operations leads to bank credit without deposits and import or other spending surges which are out of line with inflows.
In December imports surged to crisis level volumes amid a surge in credit, after large volumes of money was printed to push down rates.
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Credit from excess liqudity can either lead to the rupee losing its attributes a store of value and means of deferred payment (depreciation) or reserve losses, when attempts are made to preserve basic attributes monetary by redeeming the excess liquidity against foreign reserves. (Colombo/Mar28/2025)
