Sri Lanka’s trade deficit contracted in September 2022
Sri Lanka’s trade deficit contracted in September 2022 as import expenditure declined, year-on-year, for the seventh consecutive month, while earnings from exports remained robust, the Central Bank reported in its External Sector Performance review revealed.
Merchandise trade deficit declined to US$ 206 million in September 2022, compared to US$ 492 million in September 2021. The cumulative deficit in the trade account during January to September 2022 contracted to US$ 4.104 billion from US$ 5.999 billion recorded over the same period in 2021.
Earnings from exports remained robust in September 2022, while import expenditure declined for the seventh consecutive month, on a year-on-year basis, reflecting the significant reduction in imports of non-food consumer goods and investment goods.
As a result, the merchandise trade deficit recorded a notable contraction in September 2022, (y-o-y). Workers’ remittances increased marginally in September 2022, (y-o-y).
Earnings from tourism recorded an increase in September 2022, compared to the same period in 2021. Foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded a notable net inflow during September 2022.
The Central Bank continued to provide forex liquidity to finance essential imports, exhausting the liquid level of gross official reserves. Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 362 per US dollar during the month.
The balance in the merchandise trade account recorded a deficit of US dollars 206 million in September 2022, compared to the deficit of US dollars 492 million recorded in September 2021 and US dollars 261 million recorded in August 2022.
Meanwhile, the cumulative deficit in the trade account during January-September 2022 narrowed to US dollars 4,104 million from US dollars 5,999 million recorded over the same period in 2021.
Earnings from merchandise exports grew by 4.3 per cent in September 2022, over September 2021, to US dollars 1,079 million. However, merchandise exports in September 2022 recorded a decline compared to August 2022 (US dollars 1,224 million).
An increase in earnings was observed in industrial and agricultural exports, while a marginal decline was recorded in mineral exports. Cumulative export earnings during January-September 2022 increased by 11.7 per cent over the same period in the last year, amounting to US dollars 9,981 million, which was mainly driven by the improvements in industrial export
Expenditure on merchandise imports declined by 15.8 per cent to US dollars 1,284 million in September 2022, compared to US dollars 1,526 million in September 2021 and US dollars 1,486 million in August 2022. A decline in import expenditure was observed in investment goods and non food consumer goods, mainly resulted from the measures to compress imports.
However, an increase was recorded in imports of intermediate goods and food and beverages.
On a cumulative basis, import expenditure from January to September 2022 amounted to US dollars 14,085 million, compared to US dollars 14,938 million recorded in the corresponding period in 2021.