Oct 08, Colombo: Sri Lanka's trade deficit in July 2018 widened significantly in comparison to July 2017 as the growth in import expenditure outpaced the increase in export earnings, the Central Bank said in its External Sector Performance review for the month.
Earnings from merchandise exports grew 5.7 percent in July 2018 to US$ 1.073 billion compared with July 2017, mainly driven by industrial exports.
On a cumulative basis in the first seven months of this year, year-on-year exports earnings increased by 6.1 percent to US$ 6.805 billion from US$ 6.413 billion a year earlier.
However, expenditure on imports increased by 10.3 percent (year-on-year) to US$ 1.754 billion in July 2018 from US$ 1.591 billion a year ago, mainly due to significant expenditure incurred on crude oil, refined petroleum products and textiles.
Cumulatively, import expenditure increased by 12.4 percent in the first seven months of 2018 to US$ 13.196 billion from US$ 11.740 billion in the same period of 2017.
The trade deficit expanded by 18.2 percent to US$ 681 million in July 2018 from US$ 576 million a year earlier. Cumulatively trade deficit increased 20 percent from US$ 5.327 billion to US$ 6.391 billion in the first seven months of the year.
In July 2018, tourist arrivals increased moderately by 6 percent and accordingly, earnings from tourism in July 2018 are estimated at US$ 404 million, with cumulative earnings amounting to US$ 2.564 billion during the first seven months of 2018.
Workers' remittances declined by 1.6 percent to US$ 619 million in July 2018. On a cumulative basis, workers' remittances increased by 0.5 percent to US$ 4.243 billion during the first seven months of 2018 in comparison to the corresponding period of 2017.
Foreign investments in the CSE, including both primary and secondary market foreign exchange flows, recorded a net outflow of US$ 3 million during July 2018. Consequently, cumulative net inflows to the CSE in the first seven months of 2018 amounted to US$ 50 million.
At end July 2018, gross official reserves were estimated at US$ 8.4 billion, equivalent to 4.5 months of imports. Total foreign assets, including foreign assets of the banking sector, was estimated at US$ 10.8 billion as at end July 2018 which was sufficient to cover 5.8 months of imports.
The Sri Lankan rupee depreciated by 10.2 per cent against the US dollar in the year up to 08 October 2018.