Oct 03, 2013 (LBO) – Sri Lanka’s economy is forecasted to grow 6.8 percent in 2013 and inflation would be 7.0 percent, the Asian Development Bank said in revised projections released this week. “Foreign holdings of government securities dipped in late August, which further weakened the rupee by 5 percent against the US dollar from the end of May to the end of August,” the report said.
Sri Lanka’s foreign reserves had dropped to equal 4.1 months of imports in August from 4.5 months in March.
The rupee has since recovered. Reserves had also gone up on foreign borrowings.
“Looking forward, eased monetary policy, continued recovery in services, and improvements in agriculture assuming normal weather will support stronger performance in the second half,” the ADB said.
“External trade is expected to remain weak.”
The trade deficit had reduced 7.1 percent. Worker remittances had grown 9 percent and financial inflows were strong, with foreign direct investment amounting to 540 million US dollars.
A trade deficit is caused typically by spending power earned from sources other than merchandise exports, which includes worker remittances (exports of labour), borrowings (expo