Earnings from merchandise exports declined in October 2022, on a year-on-year basis, for the first time since March 2022, mainly due to lower earnings from garments exports.
Earnings from the export of industrial goods declined in October 2022 by 13.4%, compared to October 2021, mainly due to the decline in the exports of garments by 12.9%, food, beverages, and tobacco by 51.3% (primarily, miscellaneous food preparations) and transport equipment by 60.7%. Exports of garments to most of the major markets recorded a decline (the USA, the EU and the UK).
Earnings from the exports of agricultural goods declined by 6.6% in October 2022, compared to October 2021. The deficit in the merchandise trade account narrowed to US D 285 million in October 2022, compared to the deficit of USD 502 million recorded in October 2021, despite it widened compared to September 2022. The merchandise trade deficit recorded a notable contraction in October 2022, compared to the previous year.
The cumulative deficit in the trade account during January to October 2022 was USD 4,389 million, declined from USD 6,501 million recorded over the same period in 2021.
However, earnings from mineral exports improved by 46.4% in October 2022, compared to October 2021, mainly due to an increase in export earnings from titanium ores categorised under ores, slag, and ash.
Expenditure on the importation of consumer goods declined by 13.5% in October 2022, led by lower expenditure on non-food consumer goods. There were marginal increases in export earnings from coconut non kernel products (mainly, fibres), unmanufactured tobacco, natural rubber and minor agricultural products.
a sizable increase was recorded in relation to gems, diamonds, and jewellery; and machinery, and mechanical appliances (mainly, electronic equipment), among others.
Foreign investment in the government securities market and the Colombo Stock Exchange (CSE) recorded a marginal net inflow during October 2022. The Central Bank continued to provide forex requirements to finance essential imports, exhausting the liquid level of gross official reserves. Gross official reserves stood at US dollars 1.7 billion as at end October 2022. Total foreign assets, which consist of gross official reserves and gross foreign assets of the banking sector, amounted to US dollars 5.8 billion at end October 2022.
Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 363 per US dollar during the month. Foreign investments in the government securities market recorded a marginal net inflow in October, while cumulative net inflow during January-October 2022 amounted to US dollars 50 million.