Rising import demand widens trade deficit to US$ 634mn

• Merchandise trade deficit expands 68 percent YoY in September
• January - September cumulative deficit reaches US$ 4.2 bn
• The terms of trade deteriorated by 1.2 percent

Sri Lanka’s trade deficit expanded significantly in September 2024 as import expenditure rose sharply on consumer and investment goods demand, outpacing a modest increase in export earnings, data from the Central Bank showed.

The merchandise trade deficit widened to US$ 634 million in September, up from US$ 377 million in the same month last year. 

For the January-September period, the cumulative deficit reached US$ 4.2 billion, compared to US$ 3.34 billion a year earlier, reflecting a broader trend of rising imports while there is a gradual recovery in domestic demand.
Merchandise exports edged up 4.1 percent year-on-year to US$ 1.01 billion in September, supported by industrial exports, primarily in textiles and garments. However, compared to August 2024, industrial exports showed a decline, particularly in high-value segments like gems, diamonds, jewellery, and machinery. 

Agricultural exports also fell year-on-year, with seafood, minor agricultural products, and tea volumes declining despite a rise in spice exports. Mineral exports likewise posted a decrease.

Imports, meanwhile, jumped 22 percent from a year earlier to US$ 1.65 billion, with expenditure increasing across all major categories. Intermediate goods imports led the gains, notably in textiles and textile articles, alongside rising imports of chemical products. 

Fuel import costs fell despite crude oil imports, driven by reduced prices and lower refined petroleum volumes. Investment goods imports rose due to higher spending on machinery and equipment, including cranes, while consumer goods imports expanded broadly across food, beverages, and non-food categories.

The terms of trade deteriorated by 1.2 percent in September as export prices declined faster than import prices. Export volumes rose by 10.3 percent, yet the average price of exports dropped by 5.6 percent. 

On the import side, volumes surged by 27.6 percent despite a 4.4 percent decrease in average prices, underscoring a volume-driven expansion in trade activity.