Mar 29, 2011 (LBO) – Sri Lanka’s economy is estimated to have grown by 8.1 percent rebounding from a slowdown a year earlier as the country benefitted from a peace dividend, Central Bank deputy governor Dharma Dheerasinghe said. “In January exports have grown 72 percent,” Dheerasinghe said.
Imports had grown at a slower rate in January. In post-independent Sri Lanka in particular due to past foreign exchange shortages created by the island’s central bank autarkists have taken aim at goods and services imported by citizens.
“Import growth is good for the country,” Dheerasinghe said. “Last year it (import growth) was 34 percent.
“The import composition for consumption is about 20 percent or less. Investment goods and intermediate goods are 80 percent of imports.”
Sri Lanka is now a part of the global supply chain and some imports are inputs to exports. Sri Lanka’ state also earns a large proportion of its revenues by taxing imports.
A trade deficit is largely caused by savings propensities. A country that imports capital (deficit spends with foreign borrowings) is likely to have a trade deficit. Remittances from workers abroad which boosts domestic spending power will also increase the trade deficit.