- Trade deficit expands on decline in exports, which surpassed decline in imports
Sri Lanka’s April merchandise trade data reflected some harsh reality, showing the stubborn reliance of the country on imports for food and beverages as Sri Lanka could not cut down on such imports as the bill on such goods further increased in the period when people remained mostly in their homes.
Sri Lanka recorded a trade deficit of US$ 840 million in April, expanding from US$ 797 million in the same month a year ago as the decline in exports exceeded the decline in imports. The consumer goods imports remained stubbornly high despite the virus brought the economy to a grinding halt during the worst of the pandemic.
Sri Lanka’s overall merchandise imports in April declined by a third to US$ 1.1 billion from US$ 1.6 billion in the year earlier, but consumer goods imports moved down very little by 1.8 percent year-on-year (YoY) to US$ 302.5 million.
Imports of food and beverages rose by 12 percent YoY to US$ 136.8 million. The leading categories, which pushed the overall bill higher, were vegetables and spices, which doubled respective imports to US$ 41 million and US$ 15 million.
Meanwhile, spending on non-food consumer goods declined by 11 percent YoY to US$ 165.7 million as all categories except personal vehicles declined double digits, due to closure of shops selling home appliances, clothing and other household and furniture items and alsodue to import controls on non-essential items.
“….a considerable increase on import expenditure on personal vehicles was observed in April 2020 compared to the previous month, mainly due to the clearing of the backlog accumulated due to service disruptions with the spread of COVID-19 in the country,” the Central Bank said.
The Central Bank on March 19 suspended motor vehicle imports as part of its measures to curtail imports to preserve foreign exchange in view of the pandemic’s toll on the economy.
Sri Lanka’s oil bill fell sharply by 58.7 percent YoY to US$ 121.8 million from the same month a year ago as the country needed less oil with factories closed, planes grounded and mobility contained.
Meanwhile, Sri Lanka exported US$ 282 million merchandise goods in April amid the worst of the pandemic, nearly a third of the US$ 798 million earned in the same month last year.
“Earnings from the three major exports sectors; agricultural, industrial and mineral exports, recorded significant contractions in April 2020.
Major export products such as textiles and garments, rubber products, petroleum products, gems, diamonds and jewellery, tea, seafood and machinery and mechanical appliances mainly contributed to the decline in export earnings,” the Central Bank said.
Sri Lanka recorded a cumulative trade deficit of US$ 2.7 billion for the first four months compared to US$ 2.5 billion in the corresponding period in 2019.