The considerable reduction in the trade deficit in March 2019 was attributed to a notable decline in year-on-year (YOY) import expenditure and increase in export income. Earnings from merchandise exports grew moderately by 2.6 percent in March 2019 to US$ 1.729 billion compared with US$ 1.108 billion in March 2018. The growth in exports was driven by the improved performance in industrial and mineral exports while agricultural exports declined.
Expenditure on imports declined in March 2019 for the fifth consecutive month by 12.6 percent to US$ 1.729 billion from US$ 1.978 billion a year ago. During the first quarter of 2019, the cumulative deficit in the trade account contracted to US$ 1.661 billion from US$ 2.982 billion recorded in the first quarter of 2018, as YOY export earnings increased by 5.6 percent while import expenditure declined by 19.3 percent.
Earnings from tourism in March recorded a growth of 4.7 percent to US$ 459 million, while during the first quarter of 2019 tourism earnings grew by 4.6 percent to US$ 1.39 billion over the corresponding period of 2018. Workers' remittances declined substantially by 15.7 percent, year-on-year, to US$ 571 million in March 2019. On a cumulative basis, workers' remittances declined by 18.3 percent to US$ 1,617 million during the first quarter of 2019.
The financial account was further strengthened in March 2019 with the proceeds of the International sovereign Bonds amounting to US$ 2.4 billion, net inflows of foreign investments to the government securities market during the month, although some net outflows were observed from the Colombo Stock Exchange (CSE).
Along with the significant reduction in the trade deficit and significant inflows to the financial account, the Sri Lankan rupee appreciated against the US dollar by 3.8 percent by end March 2019 compared to end 2018. Despite the marginal depreciation of the rupee in the aftermath of the Easter Sunday bomb attacks, it recorded an appreciation of 3.8 percent during the year up to 28 May 2019.
On 13 May 2019, the Executive Board of the International Monetary Fund (IMF) completed the Fifth Review under Sri Lanka's Extended Fund Facility (EFF) approving the disbursement of the sixth tranche amounting to SDR 118.5 million (approximately US$ 164.1 million). The Executive Board also approved an extension of the arrangement by one year, until June 2020, and rephased the remaining disbursements. The country's gross official reserves stood at US$ 7.6 billion, which was equivalent to 4.3 months of imports at end March 2019.