Sri Lanka’s merchandise trade deficit recorded the lowest in 2022 in December, as earnings from exports highest ever while expenditure on imports declined significantly in 2022, compared to 2021, the Central Bank reported in its External recording the Sector Performance review for the month on Tuesday (31).
Merchandise trade deficit declined to US$ 358 million in December 2022, compared to US$ 1.085 billion in December 2021. The cumulative deficit in the trade account during January to December 2022 contracted to US$ 5.185 billion from US$ 8.139 billion recorded over the same period in 2021.
Earnings from merchandise exports declined by 7.7 percent in December 2022, over December 2021, to US$ 1.068 billion.
The decline in earnings from industrial exports mainly contributed to the decline in export earnings in December 2022
Cumulatively, exports earnings recorded a 4.9 percent growth to US$ 13.11 billion in 2022 compared to US$ 12.5 billion in 2021.
Expenditure on merchandise imports in December 2022 declined by 36.4 percent to US$ 1.426 billion, compared to US$ 2.241 billion recorded in December 2021.
Expenditure on the importation of consumer goods declined in December 2022 mainly due to the decline in non-food consumer goods imports, driven by the reduction in the import of medical and pharmaceuticals.
Meanwhile, import expenditure on a cumulative basis from January to December 2022 declined by 11.4 percent to US$ 18.3 billion from US$ 20.6 billion recorded for 2021.
Earnings from tourism in the month of December 2022 are estimated at US$ 127 million, in comparison to US$ 81 million in the previous month. Earnings from tourism are estimated at US$ 1.136 billion in 2022, compared to US$ 507 million in 2021.
Workers’ remittances in 2022 amounted to US$ 3.789 billion, in comparison to US$ 5.491 billion in 2021, recording a decline of 31.0 percent, though a notable recovery was witnessed during the latter part of the year.
Foreign investments in the government securities market recorded a cumulative net inflow of US$ 51 million during 2022, with a marginal net inflow in December 2022.
On a cumulative basis, the Colombo Stock Exchange (CSE), including primary and secondary market transactions, recorded a net inflow of foreign investments amounting to US$ 182 million during 2022.
Gross official reserves stood at U$ 1.9 billion at end December 2022. This included the swap facility from the People’s Bank of China equivalent to around US dollars 1.4 billion, which is subject to conditionalities on the usability.
The Central Bank continued to supply forex liquidity to finance essential imports by utilizing inflows to gross official reserves. Consequently, the level of liquid reserves continues to remain at significantly low level by end of December 2022.
The Central Bank recorded a net absorption of foreign exchange from the market in December 2022, resulting in a marginal improvement of liquid reserves by end of December 2022.
Total foreign assets, which consist of gross official reserves and foreign assets of the banking sector, amounted to US$ 5.8 billion at end December 2022.
Exchange rate continued to remain stable through December 2022, following the introduction of daily permissible band in mid-May 2022. Accordingly, Annual depreciation of the rupee in 2022 was 44.8 percent against the US dollar.
Meanwhile, the rupee recorded an appreciation of 0.3 per cent against the US dollar during the year up to 31 January 2023.