Sri Lanka’s tourism revenue up 12.1-pct in June 2025; surpasses $1.7 bln in Jan-June

Saturday July 5, 2025 11:15 am

ECONOMYNEXT – Sri Lanka’s foreign exchange revenue from tourism rose to $169.5 million in June, rising 12.1 percent compared to the same month last year, the central bank said, quoting tourism promotion authorities.

The revenue in May last year was $151.1 million.

Sri Lanka’s new government has aimed at an ambitious $5 billion revenue and a 3 million arrival targets this year.

The country has received $1.71 billion earnings from tourism in the first six months of the year with a 10 percent rise compared to $1.56 billion in the same period last year.

The island nation witnessed $3.17 billion revenue in 2024, with a 53.2 percent jump compared to $2.07 billion in the previous year, the data showed.

The arrivals also have picked up 15.6 percent in the first six months of 2025 compared to the same period last year with the number of foreign visitors to Sri Lanka rising to 1,168,044 in the period compared to last year’s 1,010,249.

The arrivals jumped 38.1 percent to 2.05 million in 2024 compared to the previous year. Sri Lanka missed its ambitious 2.3 million tourist arrival target and $5 billion revenue goal in 2024.

Tourism accounted for nearly 5 percent of Sri Lanka’s economy when the sector was at its peak in 2018. Since then, it has been hit by violent Easter Sunday suicide attack in 2019 and Covid-19 pandemic in 2020 followed by an unprecedented economic crisis.

The tourism earnings figure is estimated from a survey conducted by the Sri Lanka Tourism Development Authority.

Sri Lanka’s imports and the merchandise trade deficit have gradually picked up as tourism earnings came in and people in the sector spent the wages and other earnings. (Colombo/July 05/2025)

Saturday July 5, 2025 4:37 pm

ECONOMYNEXT – The increased tariffs, US policy uncertainty and elevated geopolitical risk are creating a more challenging macroeconomic environment, Fitch Ratings has said.

“Four key themes remain key to watch that could alter our base case expectations in the second half. These include trade and tariffs, inflation and interest rates, geopolitics, and fiscal/economic policy,” the ratings agency said.

Fitch said it expected global real GDP growth to decelerate to 2.2 percent in 2025, down from 2.9 percent in 2024.

The full statement is reproduced below:

Trade War, Policy Uncertainty Undermine 2025 Global Credit Outlook

Fitch Ratings-New York-02 July 2025: The 2025 outlook for global credit has worsened over the course of 1H25 as increased tariffs, US policy uncertainty and elevated geopolitical risk has created a more challenging macroeconomic environment than Fitch Ratings had originally expected. An additional 56 of 288 sector and asset performance outlooks – assessments of our operational and business condition expectations for 2025 – have been changed to ‘deteriorating’ from ‘neutral’ at mid-year.

Four key themes remain key to watch that could alter our base case expectations in the second half. These include trade and tariffs, inflation and interest rates, geopolitics, and fiscal/economic policy. A much more aggressive US protectionist agenda, including tariff rates far in excess of our original assumptions set at end-2024, is the key factor driving the negative revisions to our macro-economic outlook up to mid-year 2025. As such, the end-point for tariffs remains a major watch item for global credit. Should the US average effective tariff rate settle much higher or lower than our current base case, it would be likely to prompt a revision to our global economic base case.

We expect global real GDP growth to decelerate to 2.2% in 2025, down from 2.9% in 2024 – a 0.4pp decline from our 2025 forecast set at end-2024. A more marked economic deceleration has been reflected in other sector forecasts, with non-financial corporates’ performance indicator forecasts also being cut in 1H25.

Ratings risk is largely yet to materialize despite the deterioration in our base case sector forecasts. There has been no significant ratings migration nor any dramatic rise in Negative Rating Outlooks to signal an increased probability of downgrades. (Colombo/Jul5/2025)

Saturday July 5, 2025 7:49 am

ECONOMYNEXT – Sri Lanka’s private credit expanded 133 billion rupees in May 2025, up from 71 billion in April, while commercial bank credit to government declined, official data show.

Private credit has expanded 478.6 billion rupees in the first five months of 2025, compared to only 71.5 billion rupees last year.

The central bank cut its policy rate last month, amid warnings that it was similar late cycle cuts that had been made after private credit recovered after post-war currency crises (which in turn were triggered by rate cuts), and it may hurt reserve collections.

Credit to government from banks fell 53 billion rupees in May.

Sri Lanka’s government has been taxing people at higher rates after the last currency crisis, and the central bank has kept the exchange rate stable, preventing the destruction of capital, which is key to reducing rates.

However, in past crises, banks have been discouraged from holding government bonds (from past deficits) when rates fell too low, and the central bank had bought them to control gilt yields from the open market or auctions, triggering currency crises.

An emblematic year was 2018, when taxes were hiked and fuel was market priced by then Finance Minister Mangala Samaraweera, who corrected the so-called 100 day excesses.

The 100-day fiscal excesses were accompanied by money printing, on claims that historical inflation was low and there was ‘space’ to cut rates, rejecting classical economic principles, triggering the 2015/2016 currency crisis.

There have been warning that even if money was not printed and rates were simply ‘signalled’ mis-directing banks, deposit raising and reserve collections will be compromised, despite no monetary instability (forex shortages) emerging.

Given the central bank’s 5 percent inflation target, which has triggered serial peacetime currency crises, there are risks in holding long bonds at low yields for any agency which is subject to mark-to-market rules.

Central bank credit to government also surged 123 billion rupees in May 2025, for reasons that are not clear.

The central bank credit number is a proxy for money printing.

However, the number can change due to valuation difference in the central bank’s securities portfolio and also net credit numbers from liquidity deposits. (Colombo/July06/2025)

Saturday July 5, 2025 7:30 am

ECONOMYNEXT – Foreign investors sold $3.8 million worth Sri Lanka government securities on a net basis in the week ended on July 3 and the country saw offshore selling for the third straight week after having inflows in the previous four weeks, Central Bank data showed.

Foreign investors sold 1,143 million rupees ($3.81 million) worth rupee bonds in the week.

The island nation witnessed around $28 dollar inflows into rupee bonds in the four weeks ending June 12, data showed.

Globally investors have been waiting for July 9 to see the impact of Donald Trump’s tariff impacts with the market’s lack of optimism for trade deals responsible for some of the equity weakness in export-reliant Asia, particularly Japan and South Korea.

Sri Lanka suffered an outflow of 10.1 billion rupees in the two weeks soon after Trump’s tariff declaration in the first week of April and the rupee has fallen slightly since then, while global investors have been shifting to safe-havens like gold.

The island nation has, however, enjoyed a total inflow of 24.7 billion rupees ($82,2 million) into rupee bonds since December 26 last year through June July 3, the data showed.

Sri Lanka’s deflationary policies have helped to see inflows amid curtailed imports, analysts have said.

The country witnessed foreign outflows worth 48.2 billion rupees in 2024 with 66 percent or 78.1 billion rupees worth outflow from the government securities in the first nine months of last year. (Colombo/July 5/2025)