Merchandise trade account deficit shrinks to USD 410 Mn in January
The deficit in the merchandise trade account narrowed to US dollars 410 million in January 2023, from US dollars 857 million recorded in January 2022 due to a larger decline in imports, compared to the decline in exports.
However, the merchandise trade deficit in January 2023 widened, compared to the deficit of US dollars 358 million recorded in December 2022. The Colombo Stock Exchange (CSE) recorded a marginal net inflow, while foreign investments in the government securities market recorded a marginal net outflow during January 2023. Meanwhile earnings from merchandise exports declined by 11.3 per cent in January 2023, over January 2022, to US dollars 978 million, continuing the moderation observed since September 2022, though at a slower pace than expected.
This decline was observed across all main categories, and the compression of industrial exports was noticeable.
Industrial exports: Earnings from the exports of industrial goods declined in January 2023, compared to January 2022, with the greatest share for the overall decrease being contributed by garments resulting from lower demand in most of the major markets (the USA, the EU and the UK).
Meanwhile, earnings from the exports of petroleum products declined due to the decline in volumes of bunker and aviation fuel exports despite higher bunker prices. Further, the declining trend of exports of rubber products (mainly, household rubber gloves) continued, although earnings from gems, diamonds, and jewellery; and machinery and mechanical appliances (mainly, electronic equipment) increased. Earnings from the export of agricultural goods declined in January 2023, compared to a year ago, driven by lower export volumes of fibres and desiccated coconut, categorised under coconut related products. However, earnings from tea exports improved with the higher average export prices of tea amidst low volumes.
Earnings from mineral exports declined in January 2023, compared to January 2022, mainly due to the decline in exports of quartz and natural graphite powder.
Expenditure on merchandise imports remained at subdued levels in January 2023. Accordingly, expenditure on imports declined by 29.2 per cent (y-o-y) to US dollars 1,388 million in January 2023, compared to US dollars 1,959 million recorded in January 2022 and US dollars 1,426 million in December 2022. Expenditure on the importation of consumer goods declined in January 2023, compared to January 2022, due to the decline in both food and non-food consumer goods.
Expenditure on the importation of intermediate goods declined in January 2023, compared to a year ago, driven by lower imports of textiles and textile articles (primarily, fabrics) indicating lower garments exports in the period ahead.
Workers’ remittances recover to USD 437 Mn
Workers’ remittances recovered to USD 437 million during January 2023, in comparison to US dollars 259 million in the corresponding month in the previous year.
Meanwhile, total departures for foreign employment were recorded at 24,236 during January 2023. Total departures of foreign employment comprised unskilled (7,556), skilled (7,283) and domestic aid (6,120) categories.
Gross official reserves reach USD 2.1 BN
Gross official reserves has reached USD 2.1 billion. 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 usability.
The Central Bank recorded a net absorption of foreign exchange from the market in January 2023, resulting in a marginal improvement in liquid reserves by the end of January 2023.
Tourism revenue up to USD 162 Mn
Earnings from tourism in the month of January 2023 are estimated at USD 162 million, in comparison to USD 127 million in the previous month and US D 152 million in the corresponding month in the previous year. Tourist arrivals increased in January 2023 to 102,545, compared to 91,961 arrivals recorded in December 2022 and 82,327 recorded in January 2022.
Exchange rate remains stable
Exchange rate continued to remain stable through January 2023 with a marginal appreciation. Accordingly, during the year up to 28 February 2023, the rupee recorded an appreciation of 0.4% against the US dollar.
Meanwhile, reflecting cross-currency movements, the Sri Lanka rupee appreciated against the euro, the pound sterling, the Japanese yen, the Indian rupee and the Australian dollar during the year up to February 28 2023.
Real effective exchange rate (REER 24) depreciated marginally during January 2023 and remained largely below the threshold of 100 index points, indicating an improvement in Sri Lanka’s external competitiveness.