Apr 02, Colombo: Sri Lanka’s trade deficit expanded in January 2022 due to continued expansion of import expenditure despite high exports earnings exceeding US$ 1.0 billion for the eighth consecutive month, the Central Bank reported Friday in its External Sector Performance review for the month.

Merchandise trade deficit widened to US$ 859 million in January 2022, compared to US$ 655 million in January 2021. However, trade deficit in January 2022 narrowed compared to the deficit of US$ 1.085 billion recorded in December 2021.

The major factors that contributed to the widening of the trade deficit are increase in imports of fuel, and textiles.

Earnings from exports in January 2022 grew by 17.5 percent over January 2021 to reach US$ 1.101 billion. An increase in earnings was observed in all categories, while industrial exports mainly contributed to the expansion.

Earnings from the export of industrial goods increased by 21.6 percent in January 2022 to US$ 890.2 million, compared to US$ 732.3 million in January 2021.

Total earnings from the export of agricultural goods in January 2022 increased by 2.3 percent to US$ 204.5 million, compared to January 2021, mainly due to the increase in export earnings from coconut, seafood, and minor agricultural products while export earnings from tea declined by 9.7%.

Expenditure on merchandise imports in January 2022 increased by 23.1 percent to US$ 1.959 billion, compared to US$ 1.592 billion recorded in January 2021, although it decreased compared to December 2021.

Increases in import expenditure were observed across all main categories, while importation of intermediate goods contributed the most.

Earnings from tourism are provisionally estimated at US$ 148 million for the month of January 2022, in comparison to US$ 233 million in December 2021.

Workers’ remittances decreased by 61.6 percent in January 2022, year-on-year, to US$ 259 million from US$ 673 million compared to January 2021.

A marginal net inflow of foreign investment was recorded in the government securities market in January 2022. The net inflows from the government securities market in January 2022 amounted to US$ 4 million.

Meanwhile, the Colombo Stock Exchange (CSE) recorded a net inflow of US$ 36 million in January 2022.

Gross official reserves stood at U$ 2.4 billion at end January 2022. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 5.4 billion at end January 2022.

As the Central Bank allowed greater flexibility in the exchange rate, a notable upward adjustment in the exchange rate is observed since March 2022. Accordingly, during the year up to 01 April 2022, the rupee recorded a depreciation of 33.0 percent against the US dollar