Sri Lanka’s trade deficit contracted in April 2022 as import expenditure declined, year-on-year, for the second consecutive month, while earnings from exports increased, the Central Bank reported in its External Sector Performance review for the month. Merchandise trade deficit declined to US$ 729 million in April 2022, compared to US$ 889 million in April 2021. However, the cumulative deficit in the trade account during March to April 2022 widened to US$ 3.131 billion from US$ 2.948 billion recorded over the same period in 2021. The major factors that contributed to the widening of the trade deficit are increase in imports of fuel, and textiles and decline in tea exports. Earnings from merchandise exports in April 2022 grew by 18.5 percent over April 2021 recording US$ 970 million. An increase in earnings was observed in industrial exports and agricultural exports, while a decline was recorded in mineral exports. Earnings from the export of industrial goods increased by 21.9 percent in April 2022 to US$ 789.0 million, compared to US$ 647.1 million in April 2021.
Total earnings from the export of agricultural goods in April 2022 increased by 7.3 percent to US$ 177.7 million, compared to April 2021, mainly attributed to the exports of coconut products. Export earnings from tea in April 2022 Increased marginally by 1.5 percent. Expenditure on merchandise imports in April 2022 marginally declined by 0.5 percent to US$ 1.699 billion, compared to US$ 1.707 billion recorded in April 2021. A decline in expenditure was observed in import of non-food consumer goods and investment goods, while an increase was recorded in import of food and intermediate goods. Earnings from tourism are provisionally estimated at US$ 113 million for the month of April 2022, in comparison to US$ 192 million in March 2022. Workers’ remittances decreased by 52 percent in April 2022, year-on-year, to US$ 249 million from US$ 519 million compared to April 2021. A marginal net inflow of foreign investment was recorded in the government securities market in April 2022. The net inflows from the government securities market in April 2022 amounted to US$ 4 million.
Meanwhile, the Colombo Stock Exchange (CSE) recorded a net inflow of US$ 2 million in April 2022. Gross official reserves stood at U$ 1.8 billion at end April 2022. This included the swap facility from the People’s Bank of China equivalent to around US dollars 1.5 billion, which is subject to conditionalities on the usability. Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 5.3 billion at end April 2022. A stabilization of the exchange rate was observed following the introduction of new exchange rate arrangement on 13 May 2022 that aimed at curtailing the excessive exchange rate volatility driven by speculation. Accordingly, during the year up to 10 June 2022, the rupee recorded a depreciation of 44.3 percent against the US dollar.