SL Reserves to surpass USD 6.3 Bn. by 2024 end
Official reserves saw a sizeable uptick of 23% in the month of December 2023, following the disbursements received from the IMF (2nd tranche), World Bank and ADB, First Capital Research said in its ‘Exchange Rate Revision – May 2024’ report.
Accordingly, the reserves level climbed higher to USD 4.4 billion by the end of 2023 and continued to exhibit robust improvement in the first half of 2024 amidst various positive developments as it closed at a three and a half-year high of USD 5.4 billion by the end of April 2024.
Moreover, Central Bank (CBSL) dollar purchases continued to outdo dollar sales, since September 2023, while March 2024 Dollar purchases mounted to a record high of USD 715.0 million, while dollar sales were null during the month. This move has resulted in a sharp appreciation of the rupee since the onset of 2024. Meanwhile in another positive development the First Capital reports (FCR) predicts that tourism earnings will thrive and are expected to reach USD 3 billion by 2024 end. In 2023, tourism earnings totaled USD 2.1 billion, accompanied by 1.5 million tourist arrivals, aligning closely with the FCR target.
In 2024, the tourism landscape is to witness resurgence as numerous airlines and cruise tourism operations recommenced activities. Concurrently, extensive promotional campaigns were launched, with a notable shift in traveler preferences from the Maldives to Sri Lanka, aimed at invigorating the tourism sector. The potential surge in tourism earnings and tourist arrivals carries the capacity to bolster the local currency through heightened demand in exchange transactions.
Moreover, it can contribute to a favorable current account balance, thereby attracting foreign investment and strengthening the currency’s value. Additionally, the ongoing growth and investment prospects associated with a developing tourism industry have the potential to spur economic expansion and attract capital inflows, further uphold currency appreciation.
Further, a stable rupee will support inflows as the recovery of the economy and a possible credit rating upgrade (possibly post achieving debt sustainability by August 2024), will make Sri Lanka an attractive destination for investments.
FCR projections indicate a surge in tourist arrivals in Sri Lanka, surpassing 2Mn in 2024, alongside a targeted earnings figure of USD 3 billion, reflecting a substantial YoY increase of 46.3%. This anticipated growth is poised to augment inflows into the country, potentially mitigating any pressures of currency depreciation.
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