Sri Lanka’s trade deficit narrowed in May 2020 as exports rebounded in the month and the decline in imports exceeded the decline in exports, the Central Bank reported Monday in its External Sector Performance review for the month.

The trade deficit narrowed to US$ 407 million in May 2020 compared to the deficit of US$ 823 million recorded in May 2019.

On a cumulative basis, the trade deficit contracted to US$ 3.1 billion during the first five months of 2020 from US$ 3.281 billion in the corresponding period of 2019.

Meanwhile, terms of trade, the ratio of the price of exports to the price of imports, improved by 20.6 per cent (year-on-year) in May 2020 with prices of exports having increased while prices of imports declining.

Earnings from merchandise exports rebounded in May 2020 to US$ 587 million, with the export sector gradually resuming activities following the relaxation of lockdown measures and the recovery of both domestic and global supply and demand chains to some extent.

Earnings from the three major export sectors declined on a year-on-year basis, with industrial exports declining the most and agricultural and mineral exports declining at a slower pace.

Earnings from industrial exports decreased by 45.9 percent in May 2020 in comparison to May 2019 while earnings from agricultural exports declined by 15.2 percent.

Expenditure on Merchandise imports also declined notably, on a year-on-year basis, in May 2020 by 44.3 percent to US$ 994 million. Expenditure on all major import sectors; consumer, intermediate and investment goods, declined in May 2020.

Cumulatively in the first five months of the 2020 YOY export earnings declined by 28.4 percent to US$ 3.52 billion from US$ 4.92 billion in May 2019 while import expenditure decreased by declined by 19.2 percent to US$ 6.62 billion from US$ 8.2 billion in the previous year.

No tourist arrival was recorded in May 2020 with the suspension of all passenger flights and ship movements to Sri Lanka from mid-March 2020 due to the outbreak of COVID19 and the cumulative earnings from tourism, which are estimated based on tourist arrivals, remained at US$ 956 million during the first five months of 2020, recording a drop of 46.3 percent from the corresponding period of 2019.

Meanwhile, workers’ remittances declined by 23.2 percent in May 2020, year-on-year, amounting to US$ 432 million. On a cumulative basis, workers’ remittances declined by 11.9 percent to US$ 2.407 billion during the first four months of 2020.

Gross official reserves stood at US$ 6.5 billion at end May 2020, equivalent to 4.2 months of imports. Meanwhile, total foreign assets consisting of gross official reserves and foreign assets of the banking sector amounted to US$ 9.2 billion at end May 2020, equivalent to 6.0 months of imports.

The Sri Lankan rupee recorded a significant appreciation during the month of May 2020. In this context, the rupee which depreciated by 9.1 per cent against the US dollar by 09 April 2020, appreciated thereafter to record an overall depreciation of 2.3 percent thus far during the year up to 13 July 2020.

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