June trade deficit narrows amid sharp import contraction

• June trade deficit narrows to US $ 316mn, lowest since Oct. 2010
• Imports fall 23.1% to US $ 1.4bn; exports up 5.8% to US $  4 1.08bn
• Significantly lower expenditure on vehicle imports, fuel bill key reasons
• Textile and garments exports rose 11.4% to US $ 505.3mn

Sri Lanka’s trade deficit in June narrowed to the lowest since October 2010 amid a significant decline in imports and a modest increase in exports, Central Bank data showed.
The trade balance narrowed to US $ 316 million in June from US $ 795 million a year ago, as imports fell 23.1 percent year-on-year (YoY) for the eighth consecutive month to US $ 1.4 billion while exports rose 5.8 percent YoY to US $ 1.08 billion.

The cumulative trade deficit in the first half of 2019 was US $ 3, 597 million, down from US $ 5, 709 million a year ago.

The Central Bank cited the reduction in motor vehicles imports and fuel as the key reason for the imports decline.

Personal vehicle imports fell 67.2 percent YoY to US $ 48.1 million in June while the fuel bill fell 17 percent YoY to US $ 284.5 million.

The cumulative vehicle imports for the first half also fell 60.1 percent YoY to US $ 324.2 million.

Import expenditure on textiles and textile articles fell 1.9 percent YoY to US $ 226.6 million in June while fertilizer imports also fell 60.4 percent YoY to US $ 8.21 million.Investment goods imports fell sharply in June as transport equipment imports fell 82.1 percent YoY to US $ 23.3 million while building material imports fell 15.8 percent YoY to 
US $ 98.6 million.

Meanwhile, earnings from merchandise exports were propped up by industrial exports, which rose 9.3 percent YoY to US $ 875.4 million.

Textile and garments exports rose 11.4 percent YoY to US $ 505.3 million while rubber products exports, which mainly consist of tyres and gloves rose 2.3 percent YoY to US $ 79.1 million. 

Export earnings from transport equipment rose sharply by over 690 percent YoY to US $ 67.6 million due to the delivery of a naval vessel to Japan by Colombo Dockyard PLC.

Remittances, foreign reserves up  

In terms of other major inflows to the current account in the month of June, worker remittances grew 2.5 percent YoY to US $ 537 million.
However on a cumulative basis, such inflows recorded a decline of 9.8 percent YoY to US $ 327 billion during the first half of 2019.

Earnings from tourism were estimated at US $ 118 million in June compared to US $ 276 million reported a year earlier.

On a cumulative basis, earnings from tourism were estimated at US $ 1.89 billion during the first six months of 2019 compared to US $ 2.18 billion during the corresponding period of 2018.
Meanwhile, foreign investments in the government securities market recorded a net outflow of US $ 5 million in June 2019. 

On a cumulative basis, net outflows in the government securities market amounted to US $ 96 million during the first half of the year. 
Foreign investments in the Colombo Stock Exchange (CSE), including primary and secondary market transactions, recorded a net inflow of US $ 10 million during the month of June 2019. 

On a cumulative basis, the CSE recorded a net outflow of US $ 10 million in the first half of 2019, including primary and secondary market transactions. 

Further, long term loans to the government recorded a net outflow of US $ 99 million during June 2019.

Meanwhile, with the proceeds of the international sovereign bonds to the tune of US $ 2 billion, the gross official foreign reserves of Sri Lanka rose to US $ 8.9 billion by end of June 2019 from US $ 6.7 billion at end of May.