June 22, Colombo: Sri Lanka’s trade deficit widened in April 2020 as decline in export earnings exceeded the decline in expenditure on imports, the Central Bank reported Monday in its External Sector Performance review for the month.
Sri Lanka’s external sector performance in April 2020 was severely affected by the COVID-19 pandemic related economic interruptions, the Central Bank said.
The imposition of a partial lockdown had a significant impact on Sri Lanka’s merchandise exports sector while shutting down the tourism industry in April 2020.
The trade deficit widened to US$ 840 million in April 2020 compared to the deficit of US$ 797 million recorded in April 2019.
On a cumulative basis, the trade deficit widened to US$ 2.693 billion during the first four months of 2020 from US$ 2.458 billion in the corresponding period of 2019.
Earnings from merchandise exports declined significantly by 64.6 percent in April 2020 to US$ 282 million compared with US$ 798 million in April 2019.
All major exports sectors; agricultural, industrial and mineral exports, recorded significant contractions in April 2020.
Disruptions to domestic production processes, disruptions to export related services due to the imposition of curfew and disturbances to both domestic and global supply and demand chains due to the outbreak of the COVID-19 pandemic were the main reasons for this sharp decline in the earnings from exports.
Major export products such as textiles and garments, rubber products, petroleum products, gems, diamonds and jewellery, tea, seafood and machinery and mechanical appliances mainly contributed to the decline in export earnings.
Earnings from industrial exports decreased by 74 percent in April 2020 in comparison to April 2019 while earnings from agricultural exports declined by 32 percent.
Expenditure on Merchandise imports also declined notably, on a year-on-year basis, in April 2020 by 29.6 percent to US$ 1.123 billion mainly led by the significant declines in intermediate and investment goods.
Cumulatively in the first four months of the 2020 YOY export earnings declined by 25.9 percent to US$ 2.932 billion from US$ 3.954 billion in April 2019 while import expenditure decreased by declined by 12.3 percent to US$ 5.625 billion from US$ 6.412 billion in the previous year.
Sri Lanka also experienced the global impact of COVID-19 outbreak and with the decline in tourist arrivals in April 2020 cumulative earnings from tourism were provisionally estimated at US$ 956 million during the first four months of 2020, recording a drop of 44.1 percent from the corresponding period of 2019.
Meanwhile, workers’ remittances declined by 32.3 percent in April 2020, year-on-year, amounting to US$ 375 million. On a cumulative basis, workers’ remittances declined by 9.0 percent to US$ 1.975 billion during the first four months of 2020.
A net outflow of the foreign investment amounting to US$ 90 million was recorded from the rupee denominated government securities market in April 2020, resulting in a cumulative net outflow of US$ 451 million during the first four months of 2020.
There were no foreign investment flows in the Colombo Stock Exchange (CSE) in April 2020 due to the suspension of trading from mid-March 2020 until mid-May 2020. Therefore, net outflows from the CSE stood at US$ 28 million in the first four months of 2020.
Gross official reserves stood at US$ 7.2 billion at end April 2020, equivalent to 4.5 months of imports. Meanwhile, total foreign assets consisting of gross official reserves and foreign assets of the banking sector amounted to US$ 10.3 billion at end April 2020, equivalent to 6.5 months of imports.
The Sri Lankan rupee, which depreciated by 9.1 percent against the US dollar up to 09 April 2020, appreciated thereafter to record an overall depreciation of 2.7 percent thus far during the year up to 22 June 2020.