May 05, 2014 (LBO) – Sri Lanka’s exports rose 5.4 percent in February 2014 from a year earlier, with apparel exports up 6.6 percent, while imports fell amid weak credit growth, official data showed. The trade deficit contracted 20.7 percent to 503.7 million US dollars.
In the first two months of 2014, exports rose 13.9 percent to 1,739 million US dollars from a year earlier, imports rose just 1.1 percent to 2,998.6 million US dollars and the trade gap contracted 12.5 percent to 1,259 million US dollars.
Sri Lanka’s trade deficit is triggered when foreign exchange earnings outside of exports such as through worker remittances, tourism or even foreign borrowings trigger imports.
High volumes of exports also trigger more imports when the proceeds are spent.
Imports usually fall when credit growth is weak and not all foreign receipts are spent within a given period, resulting is build ups of domestic liquidity and foreign reserves.
Sri Lanka’s credit growth has slackened after a credit bubble fired a balance of payments crisis in 2011/2012. In February private credit fell in absolute terms.
Update II In the first two months of the year exports were up 13.9 percent