Inflows improve

The Central Bank said that inflows continued to improve in May, with better prospects in July as well.

It said with respect to inflows to the services account of the balance of payments, earnings from tourism in May 2012 grew at a healthy rate of 20.6%, year-on-year, to $ 57 million, while during the first five months of 2012, earnings from tourism grew by 24.9%, year-on-year, to $ 397 million.

Tourist arrivals in May 2012 increased by 17.5% to 57,506, raising arrivals during the first five months of 2012 to 387,622.

Workers’ remittances continued to grow at a robust rate of over 20%, year-on-year, to $507 million in May 2012, while cumulative inflows on account of workers’ remittances during the first five months of 2012 increased by 17.7% to $ 2,475 million. Hence, net current transfers continued to help cushion the current account of the balance of payments.

There have been substantial foreign currency inflows to the capital and financial account of the balance of payments during the first half of 2012.

Foreign Direct Investment (FDI) inflows to major projects during the first five months of 2012 are estimated at $ 437 million. Investments at the Colombo Stock Exchange increased by $ 187 million, on a net basis, by end June 2012.

In addition, long-term borrowings by commercial banks during January-June 2012 amounted to $ 927.5 million. A significant increase has also been seen in foreign investments in Government securities, with net inflows to Treasury bills and Treasury bonds during the first six months of 2012 amounting to $ 441 million. Further, long-term inflows to the Government amounted to $ 633 million during the first five months of 2012.

Gross official reserves amounted to $ 5,815 million by end May 2012, while total international reserves, which include gross official reserves and foreign assets of commercial banks amounted to $ 7,695 million.

In terms of months of imports, gross official reserves were equivalent to 3.4 months of imports by end May 2012 while total reserves were equivalent to 4.5 months of imports. In the meantime, with the receipt of the ninth and final tranche of $ 415 million under the Stand-by Arrangement (SBA) facility and the proceeds of the fifth international sovereign bond of $ 1,000 million, gross official reserves are expected to increase substantially by end July 2012.