Sri Lanka’s trade deficit widens in February

The deficit in the trade balance widened to US$317 million in February from US$147 million in February 2007, the Central Bank said. The cumulative deficit in the trade balance for the period January - February 2008 amounted to US$937 million, compared to the deficit of US$ 447 million for the corresponding period last year. However, worker remittances increased by around 23 percent during this period to US$487 million, cushioning the impact of the trade deficit on the current account.

The overall balance of payments is provisionally estimated to have recorded a surplus of around US$448 million by end-March 2008. “Consequently, the gross official reserves are estimated to have increased to US$3,521 million by end March 2008, which is sufficient to finance around 3.5 months of imports,” the bank said.

Earnings from exports increased by 9.7 percent, year-on-year, in February to US$643 million. Tea, rubber products, machinery and equipment, minor agricultural products, gems and jewellery, and rubber were amongst the main categories of exports that contributed to this growth.

Earnings from tea made a key contribution to the growth in agricultural exports, with export prices of tea continuing to remain strong. Industrial exports, with a share of 73 per cent in total exports, contributed only 18 per cent to the growth in exports, as earnings from textiles and garments declined by 2.7 percent, year-on-year, in February. Cumulative earnings from exports during the period January - February have recorded a growth of 11.6 percent, year-on-year, and amounted to US$1,198 million.

Expenditure on imports in February increased by 31 percent, on a year-on-year basis, to US$960 million. Cumulative expenditure on imports during the first two months of 2008 amounted to US$ 2,135 million, having increased by 40.4 percent year-on-year. Expenditure on imports of consumer goods increased by 40 percent, year-on-year, with sharp increases in imports of rice and wheat, in respect of which significant increases have been recorded in both the price and the quantity of import.