September 16, 2019
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    Trade deficit contracts further in June

    August 21, 2019

    Sri Lanka's external sector strengthened further in June 2019 with a marked contraction in the trade deficit as imports declined and exports increased, the Central Bank reported Tuesday in its External Sector Performance review for the month.In June 2019, the trade deficit narrowed to US dollars 316 million, the lowest since October 2010.

    The considerable reduction in the trade deficit in June 2019 was attributed to a notable decline in year-on-year (YOY) import expenditure by 23.1 percent and an increase of export earnings by 5.8 percent.Earnings from merchandise exports grew by 5.8 percent in June 2019 to US$ 1.084 billion compared with US$ 1.024 billion in June 2018 due to an increase mainly in industrial exports although earnings from agricultural exports decreased.

    The growth in exports was driven by the improved performance in performance in textiles and garments and rubber product exports and transport equipment.Expenditure on imports declined in June 2019 for the eighth consecutive month by 23.1 percent to US$ 1.4 billion from US$ 1.82 billion a year ago.During the first six months of 2019, the cumulative deficit in the trade account contracted to US$ 3.597 billion from US$ 5.709 billion recorded in the corresponding period of 2018. Cumulatively in the first half of the year YOY export earnings increased by 4.7 percent to US$ 6 billion from US$ 5.732 billion while import expenditure declined by 16.1 percent to US$ 9.6 billion from US$ 11.4 billion in 2018.

    Earnings from tourism picked up in June, gradually recovering from the impact of the Easter Sunday attacks. Earnings from tourism increased by 66.8 per cent in June 2019 in comparison to May 2019. However, earnings from tourism declined on a year-on-year basis by 57.0 per cent in June 2019 Workers' remittances at US dollars 537 million in June 2019 recorded a growth of 2.5 percent (year-on-year). On a cumulative basis, workers' remittances amounted to US$ 3.27 billion during the first half of 2019.

    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. The Sri Lankan rupee appreciated by 3.0 percent against the US dollar during the year up to 20 August 2019. With the proceeds of the issuance of the ISB, gross official reserves increased to US$ 8.9 billion at end June 2019, which was equivalent to 5.2 months of imports.

     

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