Sri Lanka's trade deficit widens in May

During the January-May period this year, the widening was over 24 per cent, the Central Bank of Sri Lanka said in a statement.

The export earnings due to lower international demands have recorded a year-on-year decline of over 15 per cent amounting to USD 710 million in May.

Defending its policy adjustments early this year to curtail imports and allow the free float of the rupee, the bank said the expenditure on imports have continued to decline in May.

The USD 1,575-million figure on imports expenditure was a 6.4 per cent drop year-on-year.

The bank says the foreign direct investment inflows to major projects during January to May have been substantial and estimated at USD 437 million.

Also the investments at the Colombo Stock Exchange had increased by USD 187 million.

With the International Monetary Fund's (IMF's) decision to release the ninth and final tranche of its stand-by facility amounting to USD 415 million, the central bank says the gross official reserves are expected to increase substantially by end of this month.

Meanwhile, IMF has recommended Sri Lanka to keep persisting with its flexible policy framework.

The IMF said due to flexibility in policy the island's fiscal deficit had come down and the inflation is currently at desirable levels.

Sri Lanka seeks another facility from the IMF to finance its development drive.