The momentum of export earnings continued with over US dollars 1.0 billion for the ninth consecutive month in February 2022.
Import expenditure also increased substantially in February 2022, year-on-year, while recording a decline, compared to the previous month. The trade deficit widened, compared to year before. Tourist arrivals showed a notable recovery in February 2022 over the same month in the previous year. Workers’ remittances continued to moderate in February 2022.
Foreign investment in the Colombo Stock Exchange (CSE) recorded a net inflow during the month. The weighted average spot exchange rate in the interbank market hovered around Rs. 202 per US dollar during February 2022.
However, the Central Bank allowed a measured adjustment in the exchange rate in the first week of March 2022, in view of the heightened pressures on the exchange rate amidst subdued liquidity in the domestic foreign exchange market, resulting in an overshoot subsequently by market forces beyond the expected level of depreciation in the measured adjustment.
The deficit in the trade account widened to US dollars 781 million in February 2022, compared to the deficit of US dollars 572 million recorded in February 2021.
However, on a month-on-month basis, the trade deficit declined in February 2022 from US dollars 859 million recorded in January 2022. Meanwhile, the cumulative deficit in the trade account during January to February 2022 widened to US dollars 1,640 million from US dollars 1,227 million recorded over the same period in 2021.
Terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 10.7 per cent in February 2022, compared to February 2021, as the increase in import prices surpassed the increase in export prices. Earnings from merchandise exports in February 2022 grew by 14.7 per cent over February 2021, recording at US dollars 1,092 million. An increase in earnings was observed in industrial exports and mineral exports, while a decrease was observed in agricultural exports.The cumulative export earnings, which increased by 16.1 per cent during January-February 2022 over the same period of the last year, amounted to US dollars 2,192 million.