July 06, 2010 (LBO) – Sri Lanka’s official foreign reserves edged up to 5,515 million US dollars in April 2010 from 5,192 million US dollars while imports also grew steeply on the back of a recovery in economic activities. The trade account is only a part of the balance of payments dealing with goods.
The gap in traded goods widens when citizens of a country receives net income from other parts of the balance of payments including services and capital inflows.
Worker remittances, which is a key source of purchasing power for imports, rose 14.5 percent in the four months to April from a year earlier to 1.19 billion US dollars.
Central Bank liquidity injections which increase nominal incomes can also widen the deficit.
In 2009 Sri Lanka’s trade deficit collapsed amid net foreign debt payments and steady withdrawals of liquidity by the central bank from money markets made easy by a contraction in bank credit to the people.
On June 28, Sri Lanka received 407.8 million US dollars from the International Monetary Fund under its stand-by arrangement with the island boosting reserves to 5,520 million US dollars, the Central Bank said earlier.
The volume was equal to 5.8 months of past imports, the