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Sri Lanka's official reserves jumped by 23% in December 2023, reaching USD 4.4 billion, and further climbed to USD 5.4 billion by April 2024.
First Capital Research projects tourism earnings to reach USD 3 billion by the end of 2024, with tourist arrivals expected to surpass 2 million, reflecting a substantial YoY increase of 46.3%.
The surge in tourism activity and anticipated economic recovery position Sri Lanka as an attractive destination for investments, fostering stability and further inflows into the economy.
A possible credit rating upgrade post achieving debt sustainability by August 2024 could enhance Sri Lanka's attractiveness to investors, contributing to economic growth and currency stability.
In December 2023, Sri Lanka's official reserves surged by a significant 23%, reaching USD 4.4 billion, propelled by disbursements from the IMF (2nd tranche), World Bank, and ADB, as outlined in First Capital Research's 'Exchange Rate Revision – May 2024' report. This positive momentum continued into the first half of 2024, with reserves peaking at USD 5.4 billion by April 2024, marking a three and a half-year high. Central Bank dollar purchases have consistently surpassed sales since September 2023, with March 2024 seeing record-high purchases of USD 715.0 million, while sales remained stagnant. This trend has led to a sharp appreciation of the rupee since the beginning of 2024.
Furthermore, the tourism sector presents promising prospects, with First Capital Reports projecting earnings to soar to USD 3 billion by the end of 2024, up from USD 2.1 billion in 2023, alongside an anticipated surge in tourist arrivals surpassing 2 million. Rejuvenated airline and cruise tourism operations, coupled with extensive promotional campaigns, are expected to fuel this growth, with a notable shift in traveler preferences towards Sri Lanka from the Maldives. This upsurge in tourism activity not only has the potential to bolster the local currency through increased demand in exchange transactions but also to contribute to a favorable current account balance, attracting foreign investment and fortifying the currency's value. These developments, coupled with the anticipated economic recovery and a potential credit rating upgrade post achieving debt sustainability by August 2024, position Sri Lanka as an attractive destination for investments, fostering stability and further inflows into the economy.
