Trade deficit widens to US dollars 716 million

Earnings from export of agricultural goods increased by 8.9 per cent

The trade deficit widened on a year-on-year basis for the third consecutive month in May 2021 to US dollars 716 million, compared to US dollars 407 million recorded in May 2020. Greater increase in import expenditure as against the increase in export earnings in May 2021 over May 2020 resulted in the widening of the trade deficit, according to statistics released by the Central Bank yesterday.

However, the trade deficit showed a month-on-month improvement in May 2021 compared to US dollars 889 million in April 2021. The cumulative trade deficit widened to US dollars 3,663 million during the period from January

to May 2021 from US dollars 3,101 million recorded in the corresponding period in 2020.

Central Bank’s data on the External Sector Performance – May 2021, further showed the following.

The ratio of the price of exports to the price of imports, deteriorated by 11.5 per cent in May 2021, compared to May 2020, with prices of imports having increased while prices of exports declining.

The import volume index and unit value index increased by 45.7 per cent and 11.0 per cent, respectively, on a year-on-year basis in May 2021. This indicates that the increase in import expenditure, on a year-on-year basis, was attributable to the combined impact of higher import volumes and prices.

Both exports and imports were significantly higher in May 2021 than in May 2020, mainly due to the statistical effect of pandemic related disruptions a year ago. Earnings from exports increased, while imports declined in May 2021 compared to the previous month.

During the month, workers’ remittances continued to increase, while earnings from tourism remained at minimal levels. In the financial account, foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded marginal net outflows in May 2021.

Meanwhile, the Sri Lankan rupee remained broadly stable throughout the month, and gross official reserves stood at US dollars 4.0 billion by end May 2021.

Earnings from merchandise exports increased to US dollars 892 million in May 2021, recording growth rates of 52.0 per cent and 9.0 per cent over May 2020 and April 2021, respectively, with higher earnings from all major sectors. Cumulative export earnings from January to May 2021 amounted to US dollars 4,692 million, a 33.3 per cent increase compared to the

corresponding period of 2020, which is largely attributable to lower statistical base during the island wide lockdown in the early months of 2020.

Along with improvements in exports across all subcategories, earnings from the export of industrial goods registered a notable increase in May 2021 over May 2020. The month-on month increase in earnings from industrial exports in May 2021 was 6.2 per cent, led by broad based improvement in most subcategories.

In May 2021, earnings from the export of agricultural goods increased by 8.9 per cent compared to May 2020.

Expenditure on the importation of both food and beverages and non-

food consumer good categories declined in May 2021 on both year-on- year (by 4.1 per cent) and month-on-month (by 9.0 per cent) bases.