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* Sri Lanka’s trade deficit widens in February 2022 despite above US$ 1.0 billion of export earnings
Thu, May 12, 2022, 11:53 pm SL Time, ColomboPage News Desk, Sri Lanka.

May 12, Colombo: Sri Lanka’s trade deficit significantly expanded in February 2022 due to continued expansion of import expenditure despite high exports earnings exceeding US$ 1.0 billion for the ninth consecutive month, the Central Bank reported Thursday in its External Sector Performance review for the month.

Merchandise trade deficit widened to US$ 781 million in February 2022, compared to US$ 572 million in February 2021. However, trade deficit in February 2022 narrowed compared to the deficit of US$ 859 million recorded in January 2022.

Meanwhile, the cumulative deficit in the trade account during January to February 2022 widened to US$ 1.64 billion from US$ 1.227 billion recorded over the same period in 2021.

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

Earnings from exports in February 2022 grew by 14.7 percent over February 2021 to reach US$ 1.092 billion. An increase in earnings was observed in industrial exports and mineral exports, while a decrease was observed in agricultural exports.

Earnings from the export of industrial goods increased by 19.4 percent in February 2022 to US$ 883.7 million, compared to US$ 740.3 million in February 2021.

Total earnings from the export of agricultural goods in February 2022 declined by 2.1 percent to US$ 202.1 million, compared to February 2021, mainly due to the decline in export earnings from tea by 10.4%.

Expenditure on merchandise imports in February 2022 increased by 22.9 percent to US$ 1.873 billion, compared to US$ 1.524 billion recorded in February 2021, although it decreased compared to January 2022.

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$ 174 million for the month of February 2022, in comparison to US$ 148 million in January 2022.

Workers’ remittances decreased by 64.6 percent in February 2022, year-on-year, to US$ 205 million from US$ 580 million compared to February 2021.

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

Meanwhile, the Colombo Stock Exchange (CSE) recorded a net inflow of US$ 49 million in February 2022.

Gross official reserves stood at U$ 2.3 billion at end February 2022. This included the swap facility from the People’s Bank of China equivalent to around US dollars 1.5 billion, which is subject to conditionalities on the usability.

Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 5.6 billion at end February 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 12 May 2022, the rupee recorded a depreciation of 44.3 percent against the US dollar

 

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