Jun 02, 2020 (LBO) – The deficit in the trade account narrowed in March 2020 to US dollars 549 million, from US dollars 592 million in March 2019, as the decline in imports in value terms exceeded the decline in exports, the Central Bank said.
However, on a cumulative basis, the trade deficit widened to US dollars 1,853 million during the first three months of 2020 from US dollars 1,661 million in the corresponding period of 2019.
Earnings from merchandise exports declined significantly, on a year on year basis, by 42.3 percent to US dollars 656 million in March 2020, reversing the marginal growth recorded in February 2020.
Disruptions to domestic production processes, disruptions to export related services due to the imposition of curfew and disruptions to both domestic and global supply and demand chains due to the outbreak of the COVID-19 pandemic were the main reasons for this sharp decline in the earnings from exports.
Accordingly, all major exports sectors; agricultural, industrial and mineral exports, recorded significant contractions in March 2020. Major export products such as textiles and garments, tea, rubber products, gems, diamonds and jewellery, machinery and mechanical appliances, seafood and coconut mainly contributed to the decline in export earnings.
However, earnings from minor agricultural products exports recorded a growth during the month.
The export volume index in March 2020 declined by 45.1 per cent, while the export unit value index improved by 7.3 per cent, indicating that the decline in exports was driven entirely by lower volumes when compared to March 2019.
Expenditure on merchandise imports declined notably, on a year on year basis, in March 2020 by 30.3 per cent to US dollars 1,205 million, reversing the increasing trend observed since December 2019.
The selective import clearing process followed by the Sri Lanka Customs (SLC), prioritising essential consumer items and the disruption to other import related services due to the imposition of curfew, disruptions to global supply and logistic chains, lower commodity prices following the COVID-19 outbreak were the main reasons for this unprecedented decline in the expenditure on imports.
In addition, urgent measures taken by the government and the Central Bank in March 2020 to ease the pressure on the exchange rate and to prevent financial market panic due to the COVID-19 pandemic, including the suspension on facilitating the importation of motor vehicles and non essential consumer goods, also contributed to this decline in import expenditure.