Sept 15, Colombo: Sri Lanka’s trade deficit significantly narrowed in July 2020, as exports increased to surpass US$ 1 billion while imports recorded a decline, the Central Bank reported Tuesday in its External Sector Performance review for the month.
The trade deficit narrowed by to US$ 209 million in July 2020 compared to the deficit of US$ 717 million recorded in July 2019.
On a cumulative basis, the trade deficit contracted to US$ 3.47 billion during the first seven months of 2020 from US$ 4.314 billion in the corresponding period of 2019.
Earnings from merchandise exports surpassed US dollars 1 billion in July for the first time since January 2020 and recorded a positive year-on-year growth for the first time since February 2020.
Earnings from merchandise exports rose 8.7% in July 2020 to US$ 1.085 billion, compared to US$ 999 million recorded in July 2019 with the gradual recovery of both domestic and global supply and demand chains and efforts by the government to support the export industries.
Earnings from agricultural exports increased significantly in July 2020 on a year-on year basis and Industrial exports recorded a growth in July 2020, year-on-year, for the first time since February 2020.
Expenditure on Merchandise imports declined on a year-on-year basis, in July 2020 by 24.6 percent to US$ 1.294 billion from 1.716 billion a year ago. Expenditure on all major import sectors; consumer, intermediate and investment goods, declined in the month.
Expenditure on all major import sectors declined in July 2020. This reduction is partly attributed to the measures taken by the government to restrict the importation of selected non-essential goods.
No tourist arrivals were recorded for the fourth consecutive month in July 2020 due to the airports and sea ports remaining shut for tourist arrivals in view of the COVID-19 pandemic. Cumulative earnings from tourism, which are estimated based on tourist arrivals, remained at US$ 956 million during the first seven months of 2020, recording a drop of 54.9 percent from the corresponding period of 2019.
Workers’ remittances continued to increase, recording a growth of 12.2 percent in July 2020, year-on-year, to US$ 702 million. However, on a cumulative basis, workers’ remittances declined by 5.5 percent to US$ 3.682 billion during the period January - July 2020, in comparison to the corresponding period of 2019.
With the receipt of the SAARCFINANCE swap facility of US dollars 400 million from the Reserve Bank of India, the level of gross official reserves increased to US dollars 7.1 billion as at end July 2020, which was sufficient to cover 4.8 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US dollars 10.0 billion at end July 2020, providing an import cover of 6.8 months.
The sharp appreciation of the rupee against the US dollar since mid-April led to limit the overall depreciation of the rupee thus far during the year up to 14 September 2020 to 1.6 percent.