COLOMBO: Sri Lanka’s trade deficit contracted in January 2016 by 9.1 percent from a year ago to $695 million, with export earnings falling for the 11th straight month, while imports fell faster than exports.
“The trade deficit narrowed on account of the higher decline in import expenditure mainly due to the drop in fuel, vehicle and rice imports, compared to the decline in earnings from exports during January 2016,” the Central Bank said.
Export earnings fell 2.5 percent in January to $894 million from the year before, largely reflecting continuous declines recorded in commodity prices in the international market, it said in a statement.
Continuing the declining trend in the last six months, expenditure on imports contracted 5.5 percent year-on-year to $1,589 million in January 2016.
The continuous weakening of demand for Ceylon tea from major buyers, mainly Russia, Turkey and some Middle-Eastern countries, caused export earnings from tea to decline 12.4 percent in January 2016 year-on-year.
“Both export volume and the average price of tea were lower than the previous year,” the Central Bank said.
But export earnings from textiles and garments, which contributed nearly 52 percent to total exports, improved 13.3 percent year-on-year in January 2016, reversing the declining trend prevailed in the last quarter of 2015.
Garment exports to both traditional and non-traditional markets improved during the month.
In line with growth in export earnings from textiles and garments, import expenditure on textile and textile articles increased 25.4 percent in January 2016, owing to the 34.0 percent increase recorded in fabrics imports.
Imports fell in January 2016 mainly because of the significant decline in expenditure on fuel imports, followed by rice and vehicle imports for personal use and investment purposes.
Import expenditure on fuel declined significantly by 39.6 percent year-on-year to $175 million, due to the drop in average import prices of all categories of fuel, together with a lower import volume of refined petroleum and coal.
Reflecting the impact of an increase in taxes for motor vehicles by the budget for 2016 expenditure on the importation of vehicles for personal use and investment purposes, which is categorised under consumer goods and investment goods, declined significantly by 12.6 percent and 42.3 percent, respectively, in January 2016.
Due to this tax increase, the importation of personal motor vehicles such as motor cars and motorcycles, and road vehicles such as lorries, trishaws and buses which are imported specially for investment purposes, declined during the month.
