July 31, Colombo: The merchandise trade balance recorded a surplus in June 2022 for the first time since August 2002, reflecting the impact of historically high monthly export earnings and the continued decline in import expenditure, the Central Bank reported Saturday in its External Sector Performance review for the month.
The balance in the merchandise trade account in June 2022 recorded a surplus of US$ 21 million, compared to the deficit of US$ 652 million recorded in June 2021, and for the first time since August 2002, where a trade surplus of US$ 110 million was recorded.
On a cumulative basis, trade deficit narrowed on a year-on-year basis January-June 2022 narrowed to US$ 3.514 billion, from US$ 4.316 billion recorded over the same period in 2021.
The major contributory factors for this decline in the cumulative trade deficit is the increase in exports of Textiles and garments and petroleum products.
Earnings from merchandise exports in June 2022 grew by 23.9 percent over June 2021 recording US$ 1.248 billion, which is the highest ever monthly export earnings recorded. An increase in earnings of both industrial and agricultural exports contributed, while mineral exports declined.
The cumulative export earnings during January-June 2022 increased by 14.3 percent over the same period in the last year, amounting to US$ 6.514 billion.
Earnings from the export of industrial goods increased by 28.4 percent in June 2022 to US$ 990.3 million, compared to US$ 771.4 million in June 2021.
Total earnings from the export of agricultural goods in June 2022 increased by 9.2 percent to US$ 251.5 million, compared to June 2021, mainly attributed to minor agricultural products and seafood while earnings from tea declined 6.0%.
Expenditure on merchandise imports declined substantially by 26.1 percent in June 2022 to US$ 1.226 billion, compared to US$ 1.659 billion recorded in June 2021.
A broad based decline in expenditure was observed due to regulatory measures to curb non-urgent imports, dearth in foreign currency liquidity, depreciation of the exchange rate etc., while high fuel expenditure countervailed the decline to a great extent, according to the report.
Earnings from tourism are provisionally estimated at US$ 59 million for the month of June 2022, in comparison to US$ 54 million in the previous month.
Workers’ remittances decreased by 42.7 percent in June 2022, year-on-year, to US$ 274 million from US$ 478 million compared to June 2021.
A marginal net inflow of foreign investment was recorded in the government securities market in June 2022. The net inflows from the government securities market in June 2022 amounted to US$ 6 million.
Meanwhile, the Colombo Stock Exchange (CSE) recorded a net inflow of US$ 92 million during the six months ending June 2022.
Gross official reserves stood at U$ 1.9 billion at end June 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$ 5.5 billion at end June 2022.
Stable level of exchange rate continued to prevail in the market throughout June 2022, following the introduction of daily permissible band in May 2022. Accordingly, during the year up to 29 July 2022, the rupee recorded a depreciation of 44.4 percent against the US dollar.