• Up from US$ 797mn year ago and US$ 929mn from April
• Loss of excessive money printing, loss of tourism income, slowdown in exports and higher oil prices key reasons 
• Remittance incomes remain only bright spot in SL’s external sector 

Sri Lanka’s deficit in the Balance of Payment (BoP) surpassed the billion dollar mark during the five months through May 2021 from US$ 797 million in the corresponding period in the previous year and US$ 929 million in April 2021, as the trade deficit expanded for the third month in a row amid slow recovery in exports and higher oil prices.

Rising commodity prices led by global oil prices caused the most to the expansion in the deficit in the trade account for the first five months, recording US$ 3.66 billion from US$ 3.1 billion in the corresponding period in 2020.

Sri Lanka has almost completely lost its forex earnings from the tourism industry due to the pandemic, which could have amounted to about US$ 4.3 billion in a normal year. 
Earnings from tourism during the five months through May came in at a poultry US$ 21 million compared to US$ 1.8 billion in 2019 or US$ 1.9 billion during its peak in 2018 before the Easter attack.

Sri Lanka projected US$ 1.5 billion from tourism trade in 2021 at the beginning of the year but achieving that number appears increasingly illusive even after opening the country’s border for tourists due to various COVID-19 related health protocols, which discourage leisure travel. 

Hence, this current performance in BoP deflates the claims made by certain parties by relating it purely to the unrelenting money printing by the Central Bank, which led part of this money to flow out as imports, putting pressure on the currency. 

In fact, the current bout of constraints in foreign liquidity was largely caused by the loss of momentum in merchandise exports caused by the business and jobs killing restrictions imposed to control the virus spread, and the climb in oil prices.

Sri Lanka’s economy was ricocheting during the first quarter by recording 4.3 percent growth in output, and by February Sri Lanka was primed to record a surplus in the current account and potentially in the BoP before things went awry from April with virus-related resections.

However, remittance incomes remain a bright spot with year-on-year increases being recorded thus far every month. 

Meanwhile, the fresh data made available by Central Bank showed that for the first three months Sri Lanka had recorded US$ 198 million worth of foreign direct investment (FDI) compared to US$ 188 million in the corresponding period last year. 

Sri Lanka aims for US$ 1.5 billion to US $ 2.0 billion FDI for 2021 pinning its hopes on Colombo Port City for which a new law was enacted to provide sweeping tax reforms and to give investors a better doing business experience.