*Central Bank says it is in better position
to build reserves with war over

The Central Bank said with the war over, it would be in a better position to build up the country’s foreign reserves on expectations that there would be more foreign currency inflows with investors and donors expected to have more confidence and a positive outlook of Sri Lanka’s economy.

"Foreign exchange inflows are expected to continue in the future in view of the positive outlook brought about by the end to the three decades of conflict. The Central Bank is now in a better position to build up its official reserves to a more comfortable level," the bank said in a statement.

The Country’s foreign reserves as at the end of March 2009 stood at US$ 1.2 billion, enough to cover imports for about 1.2 months while exports declined by 7.8 percent along with imports which declined by 11.8 percent during the month.

Foreign currency reserves in February stood at US$ 1.3 billion.

The Central Bank said the trade deficit contracted for the third consecutive month in March 2009 as imports continued to decelerate faster than exports.

The Trade deficit contracted by 17.6 per cent in March 2009, year-on-year, to US$ 383 million.

The cumulative trade deficit decreased by 54.0 per cent to US$ 645 million during the first quarter of 2009 from US$ 1,401 million for the same period in 2008.

"Private remittances, which recorded the highest ever value of US$ 278 million in March 2009, led remittances to reach US$ 774 million during the first quarter, (a decline of 1.7 percent) compared to US$ 787 million for the same period 2008. As a result, remittances during the first quarter amounted US$ 129 million (about 20 per cent) in excess of the trade deficit," the Central Bank said.

During the first half of 2008, the Central Bank always published the status of the country’s balance of payments position. But the country is now facing a balance of payments crisis for which the US$ 1.9 billion IMF loan is expected to stabilize.

Export earnings declined by 12.9 percent during the first quarter of 2009 to US$ 1.6 billion from US$ 1.8 billion the previous year. Imports declined by 30.3 percent to US$ 2.3 billion from US$ 3.2 billion.

Apparel exports however grew by almost 6 percent from US$ 826 million during the first quarter from US$ 780 million during the same period in 2008. While exports to the European Union grew by 18.4 percent in March 2009, those to the US declined by 4.5 percent, the Central Bank said.

Meanwhile Petroleum imports declined by 50.4 percent to US$ 653 million during the first quarter from US$ 785 million the previous year.