Low export earnings, high import expenditure widen December trade deficit

„December trade deficit expands to US $ 487mn „Cumulative trade deficit narrowed to lowest since 2010 to US $ 4,900mn „Earnings from merchandise exports in 2023 declined by 9.1% YOY „Expenditure on merchandise imports in 2023 down 8.1% YOY

Sri Lanka’s merchandise trade deficit widened in December 2023 when compared with the corresponding month in 2022, due to the combined impact of low export earnings and high import expenditure.

The data released by the Central Bank showed that the deficit in the merchandise trade expanded to US $ 487 million in December 2023, from US $ 358 million in December 2022.

In November 2023, the deficit in the merchandise trade account narrowed to US $ 390 million, from US $ 683 million in October.

The earnings from merchandise exports declined by 6.2 percent year-on-year (YOY) to US $ 1,002 million in December 2023, compared to US $ 1,068 million in December 2022.

A decline in earnings was observed in industrial exports and mineral exports, while an increase was recorded in agricultural exports in December 2023.

The expenditure on merchandise imports increased to US $ 1,489 million in December 2023, compared to US $ 1,426 million in December 2022. In November, the merchandise imports recorded US $ 1,389 million.

The YOY increase was recorded in imports of investment goods and consumer goods, partly due to the relaxation of import restrictions, the Central Bank said.

As reported by Mirror Business earlier this week, the cumulative analysis shows that for the 12 months of 2023, the trade deficit narrowed to the lowest since 2010 to US $ 4,900 million, from US $ 5,185 million in 2022.

The earnings from merchandise exports in 2023 declined by 9.1 percent YOY to US $ 11,911 million. The decline in industrial exports, led by garments, mainly contributed to the decline in export earnings in 2023.

The expenditure on merchandise imports in 2023 amounted to US $ 16,811 million, recording a decline of 8.1 percent YOY, resulting from the restrictions on non-urgent imports, lower activities of the economy and lower public spending capacity, due to tight monetary conditions.

Meanwhile, workers’ remittances amounted to US $ 570 million in December 2023,

compared to US $ 537 million in November 2023 and US $ 476 million in December 2022. Consequently, workers’ remittances in 2023 amounted to US $ 5,970 million, compared to US $ 3,789 million in 2022, recording a YOY growth of 57.5 percent.

The earnings from tourism in December 2023 were estimated at US $ 269 million, in comparison to US $ 127 million in December 2022. The earnings from tourism in 2023 amounted to US $ 2,068 million, recording a YOY growth of 82.0 percent. Foreign investments in the government securities market recorded net inflows of US $ 210 million in 2023, despite a net outflow of US $ 23 million in December 2023. Meanwhile, foreign inflows to the Colombo Stock Exchange, including both primary and secondary market transactions, recorded a net inflow of US $ 18 million in 2023.

Gross official reserves improved to US $ 4.4 billion by the end of December 2023.