Daily Mirror (Sri Lanka)

Au­gust trade deficit nar­rows amid lower im­ports

- Business · Finance · Sri Lanka · United States of America · European Union

Trade bal­ance in Aug. nar­rows to US$ 342mn from US$ 541mn in Aug. 2019 Nar­rows by over US$ 1bn to US$ 3.8bn in Jan-aug. 2020 from US$ 4.8bn in Jan-aug. 2019

Govt. ex­pects trade deficit to be US$ 5.8bn in 2020, sig­nif­i­cantly down from US$ 8bn in 2019. Mer­chan­dise ex­ports close to US$ 950mn, con­tin­u­ing up­ward mo­men­tum since May Im­ports down by 18% in Aug. helped govt.’s im­port re­stric­tions and lower int’l oil prices

Sri Lanka’s trade deficit con­tin­ued to nar­row as im­ports con­tin­ued to de­cline at a faster pace than the de­cline in ex­port earn­ings in the month of Au­gust, the lat­est ex­ter­nal sec­tor data re­leased by the Cen­tral Bank showed.

The deficit in the trade ac­count in Au­gust 2020 nar­rowed to US$ 342 mil­lion from US$ 541 mil­lion i n Au­gust 2019, as im­ports de­clined at a faster pace than the de­cline in ex­ports.

Also, on a cu­mu­la­tive ba­sis, the trade deficit nar­rowed by over US$ 1 bil­lion to US$ 3,812 mil­lion dur­ing the pe­riod from Jan­uary to Au­gust 2020 from US$ 4,855 mil­lion in the cor­re­spond­ing pe­riod of 2019.

The ma­jor con­trib­u­tory fac­tors for the de­cline in trade deficit were, lower im­ports of fuel, tex­tiles, build­ing ma­te­ri­als, ma­chin­ery & equip­ment and per­sonal ve­hi­cles.

The gov­ern­ment has placed reg­u­la­tory re­stric­tions on goods iden­ti­fied as non-es­sen­tial im­ports to pre­serve the coun­try’s for­eign re­serves and the cur­rency. The gov­ern­ment ex­pects the trade ac­count deficit to nar­row to US$ 5.8 bil­lion this year from US$ 8 bil­lion in 2019.

Mean­while, mer­chan­dise ex­port per­for­mance re­mained strong in Au­gust, al­though down from year-onyear (YOY) and month-on-month ba­sis.

Mer­chan­dise ex­ports de­clined to US$ 947 mil­lion in Au­gust 2020 com­pared to US$ 1,033 mil­lion recorded in Au­gust 2019 and US$ 1,085 mil­lion recorded in July 2020.

The YOY de­cline em­anated from de­clines recorded in earn­ings from all three ma­jor cat­e­gories of ex­ports namely, in­dus­trial, agri­cul­tural, and min­eral ex­ports.

In­dus­trial ex­ports de­clined by 10.2 per­cent, YOY in Au­gust 2020 mainly due to re­duced earn­ings from ex­ports re­lated to tex­tiles and gar­ments, petroleum prod­ucts, gems, di­a­monds and jew­ellery, leather, travel goods and footwear and base met­als and ar­ti­cles.

Earn­ings from tex­tiles and gar­ments de­clined by 11.9 per­cent YOY to US$ 440 mil­lion in Au­gust 2020, led by lower gar­ments ex­ports to the USA and EU.

How­ever, a notable in­crease was recorded in earn­ings from per­sonal pro­tec­tive equip­ment (PPE) such as face­masks and pro­tec­tive suits, which are cat­e­gorised un­der other made up ar­ti­cles.

Earn­ings from agri­cul­tural ex­ports de­clined marginally on a YOY ba­sis to US$ 216 mil­lion in Au­gust 2020. The de­cline in the over­all earn­ings from agri­cul­tural ex­ports was led by tea ex­ports, which de­clined con­sid­er­ably by 13.3 per­cent, fol­lowed by seafood and rub­ber.

Mean­while, con­tin­u­ing the YOY de­clin­ing trend ob­served since March 2020, mer­chan­dise im­ports recorded a de­cline of 18.1 per­cent to US$ 1,289 mil­lion in Au­gust 2020. The con­tin­u­a­tion of mea­sures taken by the gov­ern­ment to re­strict the im­por­ta­tion of se­lected non-es­sen­tial goods and lower fuel prices in the in­ter­na­tional mar­ket pri­mar­ily caused this de­cline.

Sri Lanka’s fuel bill for Au­gust 2020 fell 5.2 per­cent YOY to US$ 247.5 mil­lion while per­sonal ve­hi­cle im­ports fell over 98 per­cent YOY to US$ 1.3 mil­lion.

Tex­tile and tex­tile ar­ti­cle im­ports fell 16.7 per­cent YOY to US$ 194.4 mil­lion while build­ing ma­te­rial im­ports de­clined over 38 per­cent YOY to US$ 82 mil­lion.

Mean­while, work­ers’ re­mit­tances recorded a notable in­crease for the third con­sec­u­tive month, record­ing a growth of 28.2 per­cent YOY in Au­gust 2020 to US$ 664 mil­lion. This in­crease helped limit the cu­mu­la­tive de­cline in work­ers’ re­mit­tances to 1.5 per­cent to US$ 4,346 mil­lion dur­ing the pe­riod from Jan­uary to Au­gust 2020, in com­par­i­son to the cor­re­spond­ing pe­riod of 2019.

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