External sector showed signs of stabilisation in May | Sunday Observer

External sector showed signs of stabilisation in May

The external sector showed signs of stabilisation, with the removal of most lockdown measures in the second week of May.

The impact of restrictions on non essential imports was observed in May with a notable reduction in merchandise imports. Meanwhile, merchandise exports, which dropped significantly in April, rebounded more than expected during the month. Workers’ remittances were significantly low in May compared to the corresponding period? last year, but recorded a notable increase compared to the extreme low levels recorded in April this year.

In relation to financial flows, the total exposure of foreign investment in the GovernmentSecurities market remained significantly low with a marginal outflow being recorded in May. With the resumption of trading in the Colombo Stock Exchange (CSE) in mid May 2020, there were some outflows of foreign investment.

The Sri Lankan rupee stabilised, mainly aided by an improved trade deficit, recording an appreciation of 3.5 per cent during May.

The deficit in the trade account narrowed by US $ 416 million in May to US dollars 407 million, from US dollars 823 million in May last year, as the decline in imports exceeded the decline in exports. On a cumulative basis, the trade deficit narrowed by US $ 180 million to US $ 3,100 million during the first five months of this year from US $ 3,281 million in the corresponding period of last year. Meanwhile, terms of trade, i.e., the ratio of the prices of exports to the prices of imports, improved by 20.6 per cent (year-on-year) in May 2020 with prices of exports having increased while prices of imports declined.