Trade deficit narrows in April

*Deficit in trade account narrows to USD 797 mn from USD 999 mn in April 2018.

* Earnings from tourism in April records a decline of 7.5 per cent (year-on-year),

*Workers’ remittances amounts to USD 554 mn in April 2019, recording a growth of 2.3 per cent

*Exchange rate stable during the latter part of April 2019.

* Gross official reserves ends at USD 7.2 billion, equivalent to 4.1 months of imports at end April 2019.

The deficit in the trade account narrowed significantly in April 2019 in comparison to the corresponding month of the previous year due to a considerable reduction in imports.

Meanwhile, on a cumulative basis, the deficit in the trade account contracted noticeably to USD 2,458 million during the first four months of 2019 in comparison to USD 3,981 million recorded in the corresponding period of 2018.

Meanwhile, the terms of trade, which represents the relative price of imports in terms of exports, deteriorated by 5.4 per cent (year-on-year) to 108.3 index points in April 2019 due to the higher rate of decline in export prices in comparison to the decline in import prices. On a cumulative basis, the terms of trade deteriorated by 1.9 per cent (year-on-year) during the first four months of 2019 in comparison to the corresponding period of 2018.

Earnings from merchandise exports increased marginally by 0.4 per cent (year-on-year) to USD 798 million in April 2019 due to an increase in industrial and mineral exports despite a reduction in agricultural exports.

Earnings from industrial exports increased in April 2019 mainly due to the improved performance in textiles and garments, petroleum products and gems, diamonds and jewellery exports. Earnings from textiles and garment exports increased in April 2019 benefiting from higher demand for garment exports from the USA and non-traditional markets such as Canada, China, Australia and Brazil. However, earnings from garments exports to the EU market declined in April 2019 due to lower demand from the UK, Italy, Germany and France.

However, export earnings from coconut rose during the month due to high export volumes of coconut kernel products led by desiccated coconut and non-kernel coconut products led by fibre.

Expenditure on merchandise imports declined by 11 per cent to USD 1,596 million, on a year-on-year basis, in April 2019, recording a decline for the sixth consecutive month. This decline was mainly due to lower imports of consumer goods and intermediate goods, particularly gold and fuel, despite an increase recorded in investment goods imports.

Import expenditure on consumer goods declined significantly in April 2019, mainly due to lower imports of non-food consumer goods, particularly personal motor vehicles.

Tourist arrivals in April 2019 was 166,975, registering a year-on-year decline of 7.5 per cent.

In April 2019, workers’ remittances amounted to US dollars 554 million, recording a year-on-year growth of 2.3 per cent. On a cumulative basis, workers’ remittances amounted to US dollars 2,171 million during the first four months of 2019.

Foreign investments to the government securities market recorded a net outflow of US dollars 79 million in April 2019. On a cumulative basis, net outflows to the government securities market amounted to US dollars 27 million during the first four months of the year.

Foreign investments in the CSE, including primary and secondary market transactions, recorded a net inflow of US dollars 10 million during the month of April 2019.

On a cumulative basis, the CSE recorded a net outflow of US dollars 24 million in the first four months of 2019. Long term loans to the government recorded a net inflow of US dollars 35 million during April 2019.

As at end April 2019, Sri Lanka’s gross official reserves were estimated at US dollars 7.2 billion, equivalent to 4.1 months of imports. Meanwhile, total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US dollars 10.1 billion as at end April 2019, equivalent to 5.8 months of imports.

The Sri Lankan rupee appreciated by 3.3 per cent against the US dollar during the year up to June 18, 2019. Reflecting cross-currency movements, the rupee also appreciated against all other major currencies.