Sri Lanka’s external sector showed a mixed performance in March 2021 with a widened trade deficit on the one hand, and a healthy growth in workers’ remittances and a slight pickup in the tourism sector on the other, the Central Bank reported Tuesday in its External Sector Performance review for the month.
The deficit in the trade account widened in March 2021, for the first time since April 2020. Both exports and imports were significantly higher in March 2021, compared to March 2020 as well as February 2021.
The trade deficit increased to US$ 832 million in March 2021 compared to the deficit of US$ 549 million recorded in March 2020.
Meanwhile, the cumulative deficit in the trade account during January – March 2021 widened to US$ 2.059 billion from US$ 1.853 billion recorded over the same period in 2020.
Earnings from merchandise exports in March 2021 increased by 66.7 percent to US$ 1.094 billion, compared to March 2020. Earnings from exports improved considerably in March 2021 compared to February 2021 also raising export earnings towards pre-pandemic export levels.
Earnings from all subsectors of industrial exports, Agricultural exports and Mineral exports have improved in March 2021, year-on-year and also recorded considerable increases over February 2021.
Cumulatively, in the first three months of 2021 export earnings increased by 12.6 percent to US$ 2.982 billion compared to US$ 2.65 billion for the same period in 2020.
Despite the continuation of the import restriction measures, expenditure on merchandise imports increased significantly in March 2021 to US dollars 1,926 million, which was the highest monthly import value since March 2018.
Accordingly, the import expenditure in March 2021 was significantly high compared to the expenditure of US$ 1.205 billion recorded in March 2020, and US$ 1.524 billion in February 2021. All major sectors of imports contributed to this increase.
Cumulatively, in the first three months of 2021 import expenditure increased by 12.0 percent to US$ 5.041 billion compared to US$ 4.503 billion for the same period in 2020.
Earnings from tourism, which are estimated based on tourist arrivals, amounted to US$ 6 million in March 2021, compared to US$ 96 million in the corresponding month of 2020. Cumulative earnings from tourism are estimated at around US$ 13 million during the first quarter of 2021 as opposed to US$ 682 million recorded in the same period in 2020.
Workers’ remittances demonstrated a significant growth in March 2021. Workers’ remittances increased significantly by 24.4 percent in March 2021, year-on-year, to US$ 612 million.
Gross official reserves at end March 2021 amounted to US$ 4.1 billion. This was equivalent to 2.9 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 6.5 billion at end March 2021, providing an import cover of 4.7 months.
The exchange rate came under severe pressure during March 2021, partly reflecting the seasonal demand for imports. Accordingly, the Sri Lankan rupee depreciated by 2.5 percent against the US dollar during the month of March. Overall, the rupee recorded a depreciation of 6.7 percent against the US dollar in 2021 up to 18 May 2021.