In October 2020, Sri Lanka’s external sector exhibited its resilience with the successful repayment of the matured International Sovereign Bond (ISB) of US dollars 1.0 billion. During the month, external sector performance was supported by the continued improvement in the trade deficit, increase in workers’ remittances and the resultant stability in the domestic foreign exchange market. While imports continued to be restrained under low global oil prices and import restrictions imposed by the Government, exports dropped in October 2020 due to the disruptions to local production and support services following the resurgence of COVID-19 cases since early October and weak demand from foreign buyers. Workers’ remittances continued to record a year-on-year growth during the month. In the financial account, the Colombo Stock Exchange (CSE) recorded a marginal net foreign investment inflow, while the government securities market recorded a marginal net outflow in October 2020. Despite the repayment of the ISB, Sri Lanka maintained gross official reserve at US dollars 5.9 billion at end October 2020. Meanwhile, net inflows to the domestic foreign exchange market eased the pressure on the exchange rate, enabling the Central Bank to absorb foreign exchange during the month. Reflecting developments in the external sector, the Sri Lankan rupee appreciated marginally during the month of October 2020.

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