Financial News: Sri Lanka’s trade deficit narrowed in August 2020, as imports declined at a faster pace than the decline in exports. the Central Bank reported Friday in its External Sector Performance review for the month.
The trade deficit narrowed to US$ 342 million in August 2020 compared to the deficit of US$ 541 million recorded in August 2019.
On a cumulative basis, the trade deficit contracted to US$ 3.812 billion during the first eight months of 2020 from US$ 4.855 billion in the corresponding period of 2019.
Earnings from merchandise declined in August by 8.3% to US$ 947 million compared to US$ 1.003 billion recorded in August 2019 and US$ 1.085 billion recorded in July 2020.
The year-on-year decline emanated from declines recorded in earnings from all three major categories of exports, namely, industrial, agricultural, and mineral exports, the Bank said.
Earnings from Industrial exports declined by 10.2 per cent, year-on-year, in August 2020 as earnings from textiles and garments declined by 11.9 percent led by lower garments exports to the USA and the EU.
Earnings from agricultural exports declined marginally by 0.7 percent on a year-on-year basis in August 2020. Expenditure on Merchandise imports declined on a year-on-year basis, in August 2020 by 18.1 percent to US$ 1.289 billion from 1.574 billion a year ago. Expenditure on all major import sectors; consumer, intermediate and investment goods, declined in the month.
Expenditure on all major import sectors declined in August 2020. This reduction is partly attributed to the measures taken by the government to restrict the importation of selected non-essential goods.
No tourist arrivals were recorded for the fifth consecutive month in August 2020 due to the airports and sea ports remaining shut for tourist arrivals in view of the COVID-19 pandemic. Cumulative earnings from tourism, which are estimated based on tourist arrivals, remained at US dollars 956 million during the year up to August 2020, recording a drop of 60.0 per cent from the corresponding period of 2019.
Meanwhile, workers’ remittances recorded a notable increase for the third consecutive month, recording a growth of 28.2 percent in August 2020, year-on-year, to US$ 664 million. This increase helped limit the cumulative decline in workers’ remittances to 1.5 percent to US$ 4.346 billion during the period from January to August 2020, in comparison to the corresponding period of 2019.
The gross official reserves amounted to US$ 7.4 billion as at end August 2020, which was equivalent to 5.1 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 10.3 billion at end August 2020, providing an import cover of 7.2 months
The sharp appreciation of the rupee against the US dollar since mid-April led to limit the overall depreciation of the rupee thus far during the year up to 09 October 2020 to 1.4 percent.