Sri Lanka's trade deficit widens in April

COLOMBO (News1st): Sri Lanka’s trade deficit widened to USD 840 million in April 2020 from USD 797 million in April the previous year, as the decline in exports exceeded the decline in imports, the central bank said. Imports in April stood at USD 1.1 billion and had dropped only by 30 percent compared to the same month last year, despite several import restrictions introduced in April due to the currency depreciation amid coronavirus pandemic. However, exports generated only 282.3 million compared to 798.1 million received in April 2019, leading to a widened trade deficit, according to a central bank report. “Sri Lanka’s external sector performance in April 2020 was severely affected by the COVID-19 pandemic related economic interruptions. The imposition of a partial lockdown had a significant impact on Sri Lanka’s merchandise exports sector while shutting down the tourism industry in April 2020," the central bank said on Monday. The central bank said the expenditure on merchandise imports also declined, with disruption to import related supply chains and restrictions imposed on non essential imports by the government and the Central Bank. Imports of consumer goods dropped to USD 302.5 million from USD 308.1 million in April last year, while imports of intermediate goods such as fuel and textile articles dropped to USD 570 million from USD 882.5 million. The finance ministry in April had suspended the imports of more than 150 products including consumer goods to prevent foreign exchange outflows. However, the restrictions were subsequently relaxed to facilitate exporters in importing raw materials. Meanwhile, earnings from tourism during the first quarter of 2020 stood at USD 956 million - a drop of 44.1 percent compared to 1.7 billion generated during the same period in 2019, the central bank noted. Sri Lanka has not seen tourist arrivals since the country shut its doors for passenger flights and ships on March 18, as part of efforts to combat COVID-19.A significant decline was recorded in workers’ remittances during the month with some migrant workers returning to the country prior to the lockdown and reduced compensation and redundancies faced by some migrant workers abroad. The central bank also said in the financial account, a net foreign investment outflow was recorded in the government securities market, while the Colombo Stock Exchange (CSE) remained closed throughout April 2020. "With increased uncertainties and lack of inflows to the domestic foreign exchange market, the Sri Lanka rupee depreciated significantly against the US dollar during the first half of April 2020," the bank said in the statement. Workers' remittances also declined to USD 375 million in April, compared to USD 554 million received in the same month last year, according to the central bank. "With some migrant workers returning to the country prior to the lockdown and reduced compensation and redundancies faced by some migrant workers abroad, a significant decline was recorded in workers’ remittances," the monetary authority observed. During the first quarter of the year, workers remittances stood at USD 1.9 billion, a nine percent decline compared to USD 2.1 billion received during the same period in 2019. Bu the central bank said the rupee began to stabilise gradually since the second half of the month with improving market sentiments. Subsequent appreciation of the exchange rate helped in limiting the depreciation to less than 3 percent so far during the year. The trade deficit widened to US dollars 2,693 million during the first four months of 2020 from US dollars 2,458 million in the corresponding period of 2019.