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Sri Lanka’s trade deficit narrowed by $ 63 million to $ 667 million in January from $ 730 million a year earlier fuelled by a larger decline in imports aided by Government policies, latest data from the Central Bank showed yesterday.
In December 2020, the trade deficit was $ 562 million and January 2021 data reflects an increase month-on-month. In 2020 the overall trade deficit amounted to $ 6 billion.
Terms of trade, i.e., the ratio of the price of exports to the price of imports, improved by 7% in January 2021, compared to January 2020, with higher export prices and lower import prices compared to January 2020.
The export volume index declined by 10.2% while the unit value index increased by 2.5% on a year-on-year basis in January 2021. This indicates that the decline in export earnings was due to lower export volumes.
Earnings from merchandise exports in January 2021 were 8% lower compared to January 2020. Earnings from exports in January 2021 were recorded at $ 924 million compared to $ 1,005 million in January 2020 and $ 964 million in December 2020.
Merchandise imports declined by 8.3% in January 2021 to $ 1,592 million continuing the year-on-year declining trend observed since March 2020. The restrictions imposed by the Government on the importation of non-essential goods mainly contributed to this outcome.
The import volume index and the unit value index declined by 4.2% and 4.3%, respectively, on a year-on-year basis in January 2021. This indicates that the decline in import expenditure was caused by the combined impact of lower import volumes and prices.
Detailing export performance, the Central Bank said earnings from the export of industrial goods declined by 11.4% in January 2021 compared to a year ago, mainly due to the decline in the export of textiles and garments by 10.8% and the decline in the export of petroleum products by 58.5%. The export of garments to all major destinations recorded a decline.
Earnings from the export of petroleum products that comprises bunkering and aviation fuel and other petroleum products declined due to the decline in quantities supplied as well as the decline in prices.
Further, exports under gems, diamonds and jewellery and many of the smaller export segments declined. However, sizable increases were recorded in relation to rubber products (mainly surgical and other gloves, and tyres); machinery and mechanical appliances (mainly electrical and electronic equipment); food, beverages and tobacco (mainly vegetables, fruits and nut preparations), among others.
Export earnings from agricultural goods increased by 5.9% in January 2021 on a year-on-year basis, mainly due to the increase in the export of spices, such as cinnamon, pepper and cloves. Earnings from tea exports increased marginally due to the price increase, while volume exported had declined. The export of coconut fibres, natural rubber and unmanufactured tobacco also recorded marginal increases. Most of the other agricultural export categories recorded a decline in earnings.
Mineral exports increased in January 2021 compared to January 2020, mainly due to the increase in export of titanium and zirconium ores, slag and other precious metals.
Detailing imports, Central Bank said expenditure on the importation of consumer goods in January 2021 declined by 7% compared to January 2020, due to the 27.9% decline in the “non-food consumer goods” imports, driven by the reduction in the import of personal vehicles. However, a significant increase of expenditure was recorded on mobile phones, home appliances as well as some other goods in the “non-food consumer good category”.
Meanwhile, the “food and beverages” category of consumer goods imports increased by 24.6%, led by a significant increase in the expenditure on sugar and coconut oil imports. Imports of lentils and chillies also recorded a sizable increase, while the import cost on most other foods and beverages was lower than in January 2020.
Expenditure on the importation of intermediate goods declined by 2.1% in January 2021 compared to a year ago, driven by a 21.4% decline in expenditure on textiles and textile articles.
Expenditure on fuel increased in January 2021 on a year-on-year basis for the first time since February 2020, as volumes imported of both crude oil and refined petroleum increased, although their average unit prices declined. The average import price of crude oil was dollars 57.65 per barrel in January 2021, compared to dollars 70.44 per barrel in January 2020.
Intermediate goods that recorded an increase include base metals (mainly iron and steel and copper and articles), vehicle and machinery parts, plastic and articles in primary forms, certain chemical products, wheat, agricultural inputs (seeds and plants and animal fodder) and rubber in primary forms. However, many types of intermediate goods, including paper and paperboard and articles thereof, fertiliser, maize, diamonds and precious metals, food preparations, mineral products, etc., showed a decline.
Imports of investment goods declined by 22.9% in January 2021 compared to January 2020. Almost all types of goods listed under all three main investment good categories, i.e., machinery and equipment, building material and transport equipment, recorded a decline. Some increases in import expenditure were observed in relation to transmission apparatus, computers and tractors.
