The import expenditure declined, while earnings from exports increased in May 2022, year-on-year, extending the contraction in the trade deficit for the third consecutive month. Meanwhile, tourist arrivals slowed in May 2022, compared to the previous month. Workers’ remittances increased in May 2022, compared to April 2022. Foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net inflows during May 2022. Considering the liquidity pressures witnessed in the domestic foreign exchange market, the Central Bank imposed cash margin requirements in May 2022, while the Government introduced restrictions on open accounts and consignment payments terms, among others. These measures were expected to curtail activity in the informal foreign exchange market and narrow the gap between the official and grey market exchange rates. Meanwhile, the weighted average spot exchange rate in the interbank market remained stable around Rs. 359 per US dollar during the month, helped by the measures introduced to manage pressures in the domestic foreign exchange market, along with the market guidance.

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