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* Sri Lanka's trade deficit significantly narrows in December 2018 reflecting the effect of policy measures
Wed, Mar 13, 2019, 09:33 pm SL Time, ColomboPage News Desk, Sri Lanka.

Mar 13, Colombo: The year-on-year deficit in the trade account narrowed significantly in December 2018 following a notable decline in the import expenditure, the Central Bank said today in its External Sector Performance review for the month.

Earnings from merchandise exports grew marginally by 1.4 percent in December 2018 to US$ 1.033 billion compared with December 2017, mainly driven by industrial exports while agricultural exports continued to decline.

Earnings from industrial exports grew by 2.1 percent during December 2018 due to higher exports of textiles and garments, while earnings from agricultural exports fell by 1.4 percent, reflecting the poor performance in almost all categories except coconut, seafood and vegetables.

On a cumulative basis in the year, year-on-year exports earnings increased by 4.7 percent to US$ 11.89 billion from US$ 11.36 billion a year earlier.

Reflecting the effect of policy measures taken by the Central Bank and the Government, expenditure on imports declined by 15.3 percent (year-on-year) to US$ 1.734 billion in December 2018 from US$ 2.048 billion a year ago recording the lowest import value for the year.

All major import categories namely intermediate goods, consumer goods and investment goods contributed to this decline, the Central Bank said.

On a cumulative basis, expenditure on merchandise imports increased by 6.0 percent to US$ 22.233 billion in 2018 in comparison to 2017 mainly driven by higher expenditure incurred on fuel, personal motor vehicles, textiles and textile articles and fertilizer imports.

The trade deficit declined to US$ 701 million in December 2018 from US$ 1.029 billion a year earlier. Cumulatively trade deficit increased 7.5 percent from US$ 9.62 billion to US$ 10.343 billion in the year.

Earnings from tourism remained healthy with a 4.8 percent (year-on-year) growth in December 2018, resulting in a total income of US$ 4.4 billion in 2018, a growth of 11.6 percent from 2017.

Workers' remittances recorded a marginal decline of 2.1 percent in 2018 to US$ 7.0 billion, including the drop of 13.0 percent in December 2018.

In the financial account, the government securities market and the Colombo Stock Exchange (CSE) recorded outflows in December 2018.

The government securities market continued to experience a withdrawal of foreign investments recording a net outflow of US$ 162 million in the month of December, raising the net cumulative outflow to US$ 802 million by the end of the first eleven months of 2018.

Meanwhile, foreign investments in the CSE, including both secondary and primary market foreign exchange flows, recorded a net outflow of US$ 55 million during the year 2018.

As at end December 2018, gross official reserves were estimated at US$ 6.9 billion, which is equivalent to 3.7 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 9.6 billion as at end December 2018, which is equivalent to 5.2 months of imports

During the year 2018, the Sri Lankan rupee depreciated by 16.4 percent against the US dollar. However, during 2019 up to 13 March, the Sri Lankan rupee appreciated by 2.2 percent against the US dollar.


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