News Today: Strengthened Reserves and Robust Inflows Boost Sri Lanka’s Economy

The external sector of the Sri Lankan economy experienced a notable improvement in 2024, driven by strengthened reserves and sustained robust inflows into the current account for the second consecutive year. This growth has been supported by rising exports, increased workers’ remittances, and a resurgence in tourism earnings, contributing to overall economic stability.

At the end of 2024, Gross Official Reserves (GOR) reached USD 6.1 billion, a significant increase from USD 4.4 billion in 2023. This improvement was facilitated by net purchases by the Central Bank from the domestic foreign exchange market, which recorded historically high levels. Additionally, Sri Lanka benefited from funds received from multilateral institutions. The People’s Bank of China (PBOC) swap facility, renewed for three years in December 2024, further bolstered reserves, ensuring a steady foreign exchange position. As a result, Sri Lanka’s import coverage of GOR, including the PBOC swap, stood at 3.9 months by the end of 2024.

Exports and Workers’ Remittances Drive Foreign Inflows

Merchandise exports grew by 7.2% in 2024 compared to the previous year, totaling USD 12,772 million—the second highest annual export earnings in Sri Lanka’s history. In December 2024 alone, export earnings reached USD 1,102 million, with both industrial and agricultural exports contributing to the increase.

Workers’ remittances also played a vital role in the economy, growing by 10.1% year-over-year to reach USD 6,575 million in 2024, compared to USD 5,970 million in 2023. December 2024 saw remittances amounting to USD 614 million, reflecting continued confidence among Sri Lankan expatriates in sending money back home.

Tourism Earnings and Service Sector Growth

The tourism sector saw a massive rebound, with earnings estimated at USD 3,169 million in 2024, up from USD 2,068 million in 2023, representing a 53.2% growth. This surge highlights the sector’s recovery following years of economic uncertainty.

Foreign investments in the Colombo Stock Exchange (CSE) recorded a net inflow, primarily driven by investments in the primary market. However, the government securities market experienced a net outflow of USD 179 million in 2024.

Total inflows into Sri Lanka’s services sector, excluding tourism, amounted to USD 3,714 million in 2024, compared to USD 3,348 million in 2023. Major contributors included sea transport services and IT/BPO-related services, which continue to be key drivers of the country’s economic growth. In December 2024 alone, the sector attracted USD 335 million in inflows.

A Positive Outlook for 2025

With a strong foundation established in 2024, Sri Lanka’s external sector remains on a positive trajectory for 2025. The continued strengthening of reserves, growing exports, and rising inflows from tourism and remittances indicate a stable economic outlook. As the country focuses on sustaining this momentum, economic resilience and investor confidence are expected to further strengthen in the coming years.