Trade deficit expands in May marking first increase since February 2022

Sri Lanka’s trade deficit expanded for the first time since February 2022 to US $ 447 million in May, compared to US $ 403 million recorded in May 2022, the data released by the Central Bank showed.

However, the cumulative deficit in the trade account during January to May 2023 was US $ 1,926 million, a sizeable decline from US $ 3,528 million recorded over the same period in 2022.

Earnings from merchandise exports declined by 2.7 percent in May 2023, year-on-year (YoY) to US $ 1,019 million, while increasing notably compared to April 2023.

The decline in earnings from industrial exports such as apparel and textiles mainly contributed to the decline in export earnings amid improved agricultural exports.

Meanwhile, cumulative export earnings during January to May 2023 recorded at US $ 4,866 million, a decline of 7.7 percent over the same period last year. Expenditure on merchandise imports increased marginally to US $ 1,466 million in May 2023, compared to US $ 1,451 million in May 2022, recording the first year-on-year increase since February 2022.

The increase in expenditure on consumer goods contributed to the increase in import expenditure amid the decline in expenditure on intermediate and investment goods imports. 

The ongoing recovery in economic activities mainly contributed to the increase in import expenditure while the gradual relaxation of import restrictions could generate higher import expenditure in the period ahead, the Central Bank said.

Meanwhile, cumulative import expenditure during January to May 2023 declined by 22.8 percent over the corresponding period in 2022.

Expenditure on the importation of consumer goods increased in May 2023, compared to a year ago, driven by the increases in expenditure on both food and non-food consumer goods.

Sri Lanka’s oil bill in May was US $ 39.1 million, compared to US $ 53 million a year ago.

Expenditure on the importation of intermediate goods declined in May 2023, compared to a year ago, driven by lower imports of fuel led by refined petroleum, while expenditure on crude oil increased notably.

Import expenditure on investment goods declined in May 2023, compared to May 2022. Almost all types of goods listed under the three main investment goods categories, namely machinery and equipment, building material and transport equipment, recorded a decline.

The cumulative imports in the first five months of the year were US $ 6,791, as opposed to US $ 8,803 million in the same period, last year.