Sri Lanka’s trade deficit widens in April 2021 despite import restrictions

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Sri Lanka’s trade deficit widens in April 2021 despite import restrictions


Wed, Jul 14, 2021, 08:21 pm SL Time, ColomboPage News Desk, Sri Lanka.

July 14, Colombo: Sri Lanka’s trade deficit widened for the third consecutive month while both exports and imports were significantly higher in the month compared to May 2020, the Central Bank reported Wednesday in its External Sector Performance review for the month.

The deficit in the trade account widened for the third consecutive month in May 2021 to US$ 716 million compared to the deficit of US$ 407 million recorded in May 2020.

Greater increase in import expenditure as against the increase in export earnings in May 2021 over May 2020 resulted in the widening of the trade deficit, the Central Bank said.

However, the trade deficit showed a month-on-month improvement in May 2021 compared to US$ 889 million in April 2021.

Meanwhile, the cumulative deficit in the first five months of 2021 widened to US$ 3.663 billion from US$ 3.101 billion recorded over the same period in 2020.

Earnings from merchandise exports increased to US$ 892 million in May 2021, recording growth rates of 52.0 percent and 9.0 percent over May 2020 and April 2021, respectively, with higher earnings from all major sectors.

Earnings from the export of industrial goods registered a notable increase of 71.3 percent while earnings from the export of agricultural goods increased by 8.9 percent in May 2021.

Cumulatively, in the first five months of 2021 export earnings increased by 33.3 percent to US$ 4.692 billion compared to US$ 3.518 billion for the same period in 2020.

Expenditure on merchandise imports in May 2021 increased notably by 61.7 percent to US$ 1.607 billion from import expenditure of US$ 994 million in May 2020.

The year-on-year increase in the import expenditure was driven by the increase in imports of intermediate and investment goods while expenditure decreased on consumer goods.

Cumulatively, in the first five months of 2021 import expenditure increased by 26.2 percent to US$ 8.355 billion compared to US$ 6.619 billion for the same period in 2020.

Earnings from tourism, which are estimated based on tourist arrivals, amounted to US$ 2 million in May 2021. Cumulative earnings from tourism are estimated at around US$ 21 million during the first four months of 2021 as opposed to US$ 682 million recorded in the same period in 2020.

Workers’ remittances increased by 6.6 percent in May 2021, year-on-year, to US$ 460 million. Workers’ remittances during the first five months of the year recorded a notable growth of 18.2 percent, year-on-year, to US$ 2.846 billion, partly due to the low base effect.

Cumulative net outflow from the government securities market during the first five months of 2021 amounted to US$ 14 million.

Gross official reserves at end May 2021 amounted to US$ 4.0 billion. This was equivalent to 2.7 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 6.8 billion at end May 2021, providing an import cover of 4.6 months.

The exchange rate remained broadly stable during the month of May 2021. The rupee recorded a depreciation of 6.7 percent against the US dollar during the year up to 14 July 2021.

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