January trade deficit widens to US $ 514mn

• Higher imports expand deficit
• Earnings from merchandise exports record marginal decline of 0.8% YoY 
• Import expenditure up 6.2% YoY

Sri Lanka’s merchandise trade deficit in January widened to US $ 514 million, from US $ 445 million in the corresponding month of the previous year, due to a higher increase in imports.

The deficit has expanded even when compared with December 2023, where US $ 487 million was recorded.

The provisional data released by the Central Bank this week showed that the earnings from merchandise exports recorded a marginal decline of 0.8 percent year-on-year (YoY) to US $ 971 million in January 2024, compared to US $ 978 million in January 2023. 

A decline in earnings was observed in industrial exports and mineral exports, while agricultural exports increased in January 2024. 

“The decline in industrial goods exports in January 2024 compared to January 2023 was mainly contributed by garments, resulting from lower exports of garments to most major markets,” the Central Bank said. 

However, the earnings from petroleum products increased, due to the increase in volumes of bunkering and aviation fuel exports. The earnings from the exports of agricultural goods too improved in January 2024, compared to a year ago, mainly contributed by minor agricultural products, coconut-related products and tea. 

Meanwhile, the earnings from mineral exports declined, due to the base effect of higher exports of zirconium ores in January 2023.

In terms of merchandise imports, the expenditure increased by 6.2 percent YoY to US $ 1,512 million in January 2024. 

The increase in expenditure on consumer goods and investment goods, partly driven by the relaxation of import restrictions, contributed to this increase, the Central Bank said. 

The increase in the expenditure on consumer goods imports in January 2024 compared to a year ago was resulted by a broad-based increase in expenditure on both food and non-food consumer goods. 

The expenditure on intermediate goods imports declined, driven by lower fuel imports, partly owing to higher hydropower generation. In contrast, the expenditure on base metals increased notably while the expenditure on textiles and textile articles imports also increased. The expenditure on investment goods increased, mainly driven by higher imports of machinery and equipment while the expenditure on building material imports also increased, owing to higher iron and steel imports.

The terms of trade, the ratio of the price of exports to the price of imports, deteriorated by 3.6 percent in January 2024 compared to January 2023, as the decline in the prices of exports surpassed the decline in the prices of imports. 

The export volume index increased by 4.4 percent, while the unit value index declined by 4.9 percent, implying that the marginal decline in export earnings in January 2024 can be attributed to the lower export prices. 

Meanwhile, the import volume index improved by 7.7 percent, while the unit value index declined by 1.4 percent, implying that the increase in import expenditure in January 2024 was driven by the volume effect.

Further, as Mirror Business reported previously, tourism earnings soared to a pre-pandemic peak of US $ 342 million in January 2024, which indicates a significant recovery for the industry.

Similarly, earnings from remittances from Sri Lankan migrants rose by 11.4 percent in January 2024 to US $ 487.6 million, continuing the months-long increase in the country’s largest foreign exchange inflow.