Sri Lanka’s trade deficit slumped to US $ 617 million in January, from US $ 701 million recorded in the same month in 2018, as the country’s import bill declined significantly while recording a modest growth in exports. 

The country imported US $ 1.6 billion worth of goods in January, indicating a notable decline of 17.8 percent from the same month in 2018, mainly due to lower import expenditure on fuel, gold and fertiliser.

Sri Lanka’s exports grew by 7.5 percent to US $ 1.03 billion in January 2019, driven entirely by higher volumes, which offset a drop in export unit values compared to the same month of last year.

“The export volume index increased notably by a 13.7 percent in January 2019 while the export unit value index declined by 5.4 percent, implying that the growth in exports was driven entirely by higher volumes in comparison to January 2018,” the Central Bank (CB) stated. 

The textiles and garment exports grew by 9.5 percent year-on-year (YoY) to US $ 475.9 million contributing to over 45 percent of the country’s export earnings, amidst a high demand for garments from the EU and USA as well as non-traditional markets such as India, Japan, Australia, China and Canada. 

Meanwhile, the CB noted that the policy measures targeting constraining imports contributed significantly to the notable decline in the import bill.

“Continuing the declining trend observed since November 2018 that reflected the impact of policy the measures taken to curtail imports, expenditure on personal motor vehicle imports showed a significant decline. Expenditure on almost all non-food consumer goods imports decreased in January 2019, compared to the corresponding month of the previous year,” the CB said.

In particular, the personal vehicle imports in the month came down by 47.9 percent to US $ 49.5 million, compared to the same month last year. 

However, the government removed the margin deposit requirement on both vehicle and non-essential consumer goods imports against letters of credit in the 2019 budget. 

The gold imports, which stood at US $ 93.7 million in January last year, has almost vanished, only having imported a negligible US $ 0.1 million worth of gold to the country this January, after the government imposed 15 percent custom duty on gold imports. 

The overall decline in imports was driven by low volumes as well as low prices of imported goods in comparison to the corresponding period of 2018.

Sri Lanka’s fuel import bill in January was contracted by 9.1 percent YoY to US $ 329 million due to lower average import prices and lower volumes of crude oil and refined petroleum products, despite a higher import volume of coal.

However, the expenditure on the importation of investment goods, including building material, machinery and equipment, also declined in January.

The CB cited that the lower expenditure on commercial cabs and auto trishaws categorised under transport equipment and iron and steel categorised under building material as the main reasons for this decline.

Further, the expenditure on rice imports continued its declining trend in January, with higher supply in the domestic market. 

For the first time since February 2018, earnings from agricultural exports recorded a growth on a YoY basis, in January 2019, mainly due to the growth in coconut, seafood, vegetables and unmanufactured tobacco exports.

However, export earnings from tea declined marginally by 0.9 percent YoY to US $ 207.6 million in January, due to lower average export prices of tea.