Sri Lanka’s trade deficit widens in June 2021 for fourth consecutive month despite import restrictions

Sri Lanka’s trade deficit widens in June 2021 for fourth consecutive month despite import restrictions

Fri, Aug 13, 2021, 10:33 pm SL Time, ColomboPage News Desk, Sri Lanka.

Aug 13, Colombo: Sri Lanka’s trade deficit widened for the fourth consecutive month in June 2021 while both exports and imports were significantly higher compared to June 2020, the Central Bank reported Friday in its External Sector Performance review for the month.

The deficit in the trade account widened in June 2021 to US$ 652 million compared to the deficit of US$ 161 million recorded in June 2020.

Considering the first half of the year, 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 six months of 2021 widened to US$ 4.316 billion from US$ 3.597 billion recorded over the same period in 2020.

Earnings from merchandise exports in June 2021 recorded an increase of 12.6 percent to US$ 1.007 billion on a year-on-year basis. Exports improved by 12.9 per cent in June 2021 over May 2021

Earnings from the export of industrial goods increased by 16.6 per cent in June 2021 compared to June 2020, with a broad-based increase in export earnings under most of the categories.

Cumulative export earnings from January to June 2021 amounted to US$ 5.699 billion, compared to US$ 4.413 billion recorded in the corresponding period in 2020.

Expenditure on merchandise imports in June 2021 increased notably by 57.2 percent to US$ 1.659 billion from import expenditure of US$ 1.055 billion in June 2020.

The increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods and investment goods, although expenditure on petroleum imports was low due to low import volumes during June 2021.

Cumulatively, in the first six months of 2021 import expenditure increased by 30.5 percent to US$ 10.015 billion compared to US$ 7.675 billion for the same period in 2020.

The tourism sector experienced a limited number of arrivals in June 2021 earning US$ 2 million in June 2021. Cumulative earnings from tourism were estimated at around US$ 23 million during the first half of 2021, compared to US$ 682 million recorded during the same period in 2020.

Workers’ remittances decreased by 16.4 percent in June 2021, year-on-year, to US$ 478 million from US$ 572 million in June 2020. Workers’ remittances during the first six months of the year recorded a notable growth of 11.6 percent, year-on-year, to US$ 3.324 billion.

Cumulative net outflow from the government securities market during the first half of 2021 amounted to US dollars 24 million.

Gross official reserves at end June 2021 amounted to US$ 4.1 billion. This was equivalent to 2.6 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 June 2021, providing an import cover of 4.5 months.

The exchange rate remained broadly stable during the month of June 2021. The rupee recorded a depreciation of 6.8 percent against the US dollar during the year up to 13 August 2021.

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