Sri Lanka has embarked on a focused path towards ensuring macro-economic and financial system stability, having faced strong headwinds from the COVID-19 pandemic. The pandemic resulted in a substantial loss of foreign exchange revenues to the country, but unprecedented support provided by the Government and the Central Bank of Sri Lanka (CBSL), from fiscal, monetary and public health aspects, has helped a strong rebound of the economy as well as a considerable recovery in some foreign exchange earning sectors. The tourism sector is also expected to display a notable recovery in the period ahead, and concerted efforts are taken to improve worker remittance inflows through formal channels. Recent tensions in the forex market have also highlighted the need for Sri Lanka to increase its reliance on foreign exchange earnings over time to strengthen the economy, rather than increasing its foreign borrowings which exposes the economy to various types of shocks.
