Sri Lanka’s trade deficit widens in July 2021 for fifth consecutive month despite import restrictions

* Sri Lanka’s trade deficit widens in July 2021 for fifth consecutive month despite import restrictions

Mon, Sep 13, 2021, 08:53 pm SL Time, ColomboPage News Desk, Sri Lanka.

Sept 13, Colombo: Sri Lanka’s trade deficit widened for the fifth consecutive month in July 2021 compared to July 2020 as expenditure of imports expanded faster than export earnings, the Central Bank reported Monday in its External Sector Performance review for the month.

The deficit in the trade account widened in July 2021 to US$ 607 million compared to the deficit of US$ 209 million recorded in July 2020.

Although exports recorded a healthy growth, import expenditure increased at a higher pace, widening the trade deficit, the Central Bank said.

The cumulative deficit in the first seven months of 2021 widened to US$ 4.922 billion from US$ 3.471 billion recorded over the same period in 2020.

Exports performed well in July 2021 despite the ongoing pandemic, according to the Central Bank. Earnings from merchandise exports in July 2021 recorded an increase of 1.7 percent to US$ 1.104 billion on a year-on-year basis.

Earnings from the export of industrial goods increased by 1.1 percent in July 2021 compared to July 2020, mainly due to the increase in earnings from export of petroleum products, machinery and mechanical appliances and rubber products.

Cumulative export earnings from January to July 2021 increased 23.7 percent to US$ 6.803 billion, compared to US$ 5.498 billion recorded in the corresponding period in 2020.

Expenditure on merchandise imports in July 2021 increased notably by 32.2 percent to US$ 1.710 billion from import expenditure of US$ 1.294 billion in July 2020.


The increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods and investment goods, despite some import controls still being in place.

Cumulatively, in the first seven months of 2021 import expenditure increased by 30.7 percent to US$ 11.725 billion compared to US$ 8.968 billion for the same period in 2020.

The tourism sector experienced a limited number of arrivals in July 2021 earning US$ 3 million in July 2021. Cumulative earnings from tourism were estimated at around US$ 26 million during the first seven months of 2021, compared to US$ 682 million recorded during the same period in 2020.

Workers’ remittances decreased by 35.4 percent in July 2021, year-on-year, to US$ 453 million from US$ 702 million in July 2020. Workers’ remittances during the first seven months of the year recorded a growth of 2.6 percent, year-on-year, to US$ 3.778 billion.

Cumulative net outflow from the government securities market during the first seven months of 2021 amounted to US$ 24 million.

Gross official reserves stood at US$ 2.8 billion at end July 2021 with the settlement of the matured ISB of US dollars 1.0 billion by the Central Bank on behalf of the Government. This was equivalent to 1.8 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 5.9 billion at end July 2021, providing an import cover of 3.8 months.

The exchange rate remained broadly stable during the month of July 2021. The rupee recorded a depreciation of 6.8 percent against the US dollar during the year up to 10 September 2021.

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