The increase in exports to the pre-pandemic levels, the notable increase in workers’ remittances and the relative stability in the domestic foreign exchange market supported Sri Lanka’s external sector in February 2021, the Central Bank reported Friday in its External Sector Performance review for the month.
The trade deficit in February 2021 broadly remained unchanged at the level reported a year ago.
The trade deficit narrowed marginally to US$ 572 million in February 2021 compared to the deficit of US$ 574 million recorded in February 2020. Both exports and imports were slightly lower in February 2021, compared to February 2020
Meanwhile, the cumulative deficit in the trade account during January – February 2021 narrowed to US$ 1.227 billion from US$ 1.304 billion recorded over the same period in 2020.
Earnings from merchandise exports in February 2021 declined by 3.7 percent to US4 952 million, compared to February 2020. Export earnings exhibited a recovery towards pre-pandemic levels since the peak of the second wave of COVID-19 spread in Sri Lanka, reaching levels close to those recorded in the same month of 2020 (US$ 989 million) and 2019 (US$ 981 million), the Central Bank said.
Earnings from the export of industrial goods declined by 6.3 percent in February 2021 compared to a year ago, mainly due to the decline in the export of textiles and garments by 5.3 percent and the decline in the export of petroleum products by 60.8 percent.
Export earnings from agricultural goods increased by 5.9 percent in February 2021 on a year-on-year basis, mainly due to the increase in the export of spices, coconut and tea.
Merchandise imports declined by 2.5 percent in February 2021 compared to February 2020, continuing the year-on-year declining trend observed since March 2020. Expenditure on merchandise imports amounted to US$ 1.524 billion in February 2021 compared to US$ 1.562 billion in February 2020. The restrictions imposed by the Government on the importation of non-essential goods mainly contributed to this outcome.
With the reopening of the country’s borders to international tourists, tourist arrivals gradually picked up in February 2021. Accordingly, earnings from tourism, which are estimated based on tourist arrivals, amounted to US$ 5 million in February 2021 compared to US$ 279 million in the same month of 2020.
Meanwhile, Workers’ remittances recorded a healthy growth in February 2021. Remittances increased by 9.9 percent in February 2021, year-on-year, to US$ 580 million from US$ 527 million recorded in February 2020.
Foreign investment in the government securities market recorded a marginal net outflow of US$ 2 million in February 2021, the Bank said.
The Central Bank has settled the SAARCFINANCE swap facility of US$ 400 million in February 2021 upon maturity.
Gross official reserves at end February 2021 amounted to US$ 4.6 billion. This was equivalent to 3.5 months of imports. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 7.3 billion at end February 2021, providing an import cover of 5.5 months.
The exchange rate remained relatively stable during February 2021 due to increased customer inflows to the domestic foreign exchange market. However, overall, the rupee recorded a depreciation of 6.8 percent against the US dollar up to 16 April 2021.
The government is responsible for introducing a new electoral system that is appropriate for the country – Min. Dullas Alahapperuma