The COVID-19 pandemic and the imposition of a partial lockdown in Sri Lanka in the second half of March 2020 affected external sector performance in March 2020. Breakdown in supply and demand chains along with the interruption of domestic production processes resulted in a notable decline in merchandise exports as well as merchandise imports. However, with a greater decline in the expenditure on imports compared to the decline in earnings from exports, the trade deficit narrowed over the same period in 2019. The tourism industry was severely affected with the imposition of travel restrictions globally and the closure of the Bandaranaike International Airport (BIA). Workers’ remittances declined notably in March 2020, with the return of migrant workers from affected countries as well as the reported job terminations of some workers abroad. However, the financial account was also strengthened with the receipt of proceeds from the syndicated loan facility in March 2020. The Sri Lankan rupee, which remained relatively stable upto the second week of March 2020, depreciated significantly until mid-April 2020, but stabilised thereafter with a notable appreciation during May 2020.
Monday, June 1, 2020