Monday, 16 September 2019 05:31

Sri Lanka’s trade deficit improves further

Sri Lanka’s trade deficit continued to improve during the first half of 2019 with the sustained growth of exports and the notable contraction in the growth of imports.

The deficit in the trade account narrowed significantly in June 2019 in comparison to the corresponding month of 2018 mainly due to the reduction in imports of motor vehicles and fuel, the Central Bank announced.

On a cumulative basis, the deficit in the trade account contracted by US$ 2,112 million to $3,597 million during the first six months of 2019 in comparison to the corresponding period of 2018.

There was a possibility of a considerable balance of payments surplus this year owing to the reduction of the trade deficit, an eminent economist said.

This could strengthen the external reserves and ease the country’s debt burden to a certain extent, he said.

Meanwhile, the terms of trade, which represents the relative price of imports in terms of exports, improved by 3.6 per cent (year-on-year) to 114 index points in June 2019 as export prices, on average, reduced at a slower pace than the decline in import prices.

However, on a cumulative basis, the terms of trade deteriorated by 1.5 per cent during the first six months of 2019 in comparison to the corresponding period of 2018.

In June 2019, the trade deficit narrowed to $316 million, the lowest since October 2010.

This considerable reduction was due to the decline in import expenditure by 23.1 per cent (year-on-year) and an increase of export earnings by 5.8 per cent (year-on-year).

(LI)

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