In January, the trade deficit continued its improving trend in recent months. The trade deficit was recorded at US $ 617 million during the month, compared to a deficit of US$ 701 million in December, and US $ 1,049 million in January last year.
The significant reduction in the trade deficit was due to the combined effect of higher earnings from exports and a notable deceleration in import expenditure.
Exports grew 7.5 per cent while imports declined significantly by 17.8 per cent in January 2019 (year-on-year).
Tourist arrivals grew 2.2 per cent (year-on-year) in January 2019, resulting in earnings from tourism of US dollars 458 million during the month. Workers’ remittances in January 2019 amounted to US dollars 545 million, a notable reduction compared to January 2018.
In the financial account, net outflows from the government securities market moderated in January 2019, compared to the second half of 2018. The government repaid the International Sovereign Bond (ISB) of US $ 1 billion that matured in January 2019, as scheduled.
The pressure on the exchange rate witnessed in the latter part of last year eased with a notable reversal during January this year.
The rupee appreciated by 1.6 per cent in January, from Rs. 182.75 per US dollar at theend December to Rs. 179.88 by the end of January.
The exchange rate appreciated to Rs. 174.65 per US dollar by April 17, an appreciation of 4.6 per cent.
With the settlement of the maturing ISB, the country’s gross official reserves declined to US dollars 6.2 billion at the end of January this year. Sri Lanka issued ISBs amounting to US $ 2.4 billion last month, increasing the gross official reserves to US $ 7.6 billion by the end of last month, which was equivalent to an estimated 4.3 months of imports.