Imports spike 35% YoY in February to $ 1.38 b

Imports in February spiked by 35% year on year to $ 1.38 billion albeit from a lower base in 2023 thereby widening the trade deficit despite improvement in exports.

The Central Bank said the increase in February was a “result of increases across all major import categories due to the relaxation of import restrictions, normalisation of economic activities and loosening monetary conditions.”

February imports however still trail behind $ 1.5 billion figure in January this year and $ 1.48 billion in December and the peak of $ 1.6 billion in October last year. Imports in the first two months of 2024 rose by 18% to $ 2.89 billion.

The increase in expenditure on consumer goods imports by 23.4% to $ 250 million in February 2024 compared to a year ago was due to a broad-based increase in expenditure on both food and non-food consumer goods.

Expenditure on intermediate goods imports increased 32% to $ 840 million driven by higher fuel and textile imports compared to February 2023. In contrast, expenditure on wheat imports decreased significantly led by lower import volumes in February 2024.

Expenditure on investment goods also recorded a broad-based increase (by 58% to $ 286 million), which was driven by machinery and equipment (mainly cranes) and building materials (mainly iron and steel).

The import volume index improved by 45.3%, while the unit value index declined by 7.1%, implying that the increase in import expenditure in February 2024 compared to February 2023 was also driven by the volume effect.

Higher imports as against exports saw the deficit in the merchandise trade account widen to $ 319 million in February 2024 from $ 39 million recorded in February 2023. The cumulative deficit in the trade account during January to February 2024 also widened to $ 860 million from $ 484 million recorded over the same period in 2023.

As per Central Bank data, earnings from merchandise exports increased by 7.9% to $ 1,059 million in February 2024 compared to $ 982 million in February 2023. An increase in earnings was observed in all major categories of exports, including industrial, agricultural, and mineral. An increase in industrial goods exports in February 2024 compared to the same period in 2023 was mainly contributed by petroleum products due to the increase in volumes of bunkering and aviation fuel exports. Earnings from exports of agricultural goods improved in February 2024 compared to a year ago mainly driven by tea due to both higher export volumes and prices. Earnings from mineral exports also increased marginally in February 2024. Earnings from exports in February 2024 increased compared to January 2024, led by higher textiles and garment exports.

The export volume index increased by 17.3%, while the unit value index declined by 8%, implying that the increase in export earnings in February 2024 compared to February 2023 can be attributed to higher export volumes.

The CBSL also said the Sri Lanka rupee appreciated by 7.6% against the US dollar during the year up to 28 March 2024. Reflecting cross-currency movements, the Sri Lanka rupee appreciated against other major currencies, such as the euro, the pound sterling, the Japanese yen, the Indian rupee, and the Australian dollar during the year up to 28 March 2024. 

“In line with the nominal appreciation, the real effective exchange rate (REER 24) also appreciated during the month of February 2024. However, the index of REER 24 remained well below the threshold of 100 index points, indicating the maintenance of external competitiveness,” said the CBSL.