May 11, Colombo: Despite a notable income from tourism and net foreign inflow to the stock market, Sri Lanka's trade deficit in February significantly widened by nearly 43 percent, according to the Central Bank data released in its External Sector Performance Review for the month.
A surge in gold imports was the primary driver behind the fastest increase in overall merchandise imports in nearly 3-1/2-years, resulting in a further widening of the trade deficit in February 2018 over US$ 1 billion for the third consecutive month, the Bank said.
The trade balance in February 2018 expanded to US$ 1.062 billion from US$ 743 million a year earlier and on a cumulative basis, in the first two months of 2018, the trade deficit widened by 25.8 percent to US$ 2.11 billion from US$ 1.68 billion recorded during the same period of 2017.
Earnings from exports increased by 5.5 percent in February 2018 to US$ 916 million from US$ 868 million earned in February last year. Export earnings from food, beverages and tobacco, petroleum products, rubber products and tea contributed largely to the growth in exports.
However, expenditure on imports also increased significantly by 22.8 percent (year-on-year) to US$ 1.98 billion in February 2018 from US$ 16 billion a year ago, particularly due to expenditure on gold imports, which continued to increase, recording the highest ever monthly gold imports in February 2018.
In February 2018, tourist arrivals increased notably by 19.3 percent and earnings from tourism are estimated at US$ 437 million in February 2018, with the cumulative earnings amounting to US$ 880 million for the first two months of 2018.
Meanwhile, workers' remittances moderated in February 2018, and on a cumulative basis, workers' remittances increased by 2.6 percent to US$ 1.3 billion compared to the first two months of 2017.
Gross official reserves of the country increased to US$ 7.9 billion at end February 2018, equivalent to 4.4 months of imports. Total foreign assets, including foreign assets of the banking sector, also increased to US$ 10.1 billion as at end February 2018, compared to US$ 10.0 billion at end January 2018.
The Sri Lankan rupee depreciated by 3.2 percent against the US dollar in the year to 11 May 2018. The weakening of the rupee partly reflects a broad based strengthening of the US dollar globally, the Bank said.