Sri Lanka’s external sector continued to be under pressurein October 2018. The trade deficit widened significantly in October due to a higher growth in import expenditure alongside a marginal growth in exports. However, it is expected that the trend of increasing imports will reduce in the coming months with the lagged impact of recently introduced restrictions on certain import categories. Meanwhile, workers’ remittances recorded a healthy increase in October, while earnings from tourism registered a marginal growth. The financial account witnessed outflows of foreign investments from the government securities market and the Colombo Stock Exchange (CSE).Foreign currency outflows together withimport expenditure exerted pressure on the domestic foreign exchange market. Consequently, the Sri Lanka rupee depreciated by 12.3 per cent in the first ten months of the year. Gross official reserves rose to US dollars 7.9 billion as at end October from US dollars 7.2 billion at end September 2018, supported by the receipt of the foreign currency term financing facility of US dollars 1 billion.

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