Central Bank of Sri Lanka - External Sector Performance 2021

21^st February 2021

The deficit in the trade account widened in December 2021 compared to a year earlier, mainly due to excessive surge in imports recording the highest ever monthly import expenditure, despite persistently high earnings from exports that exceeded US dollars 1.0 billion for the seventh consecutive month. During the year 2021, the trade deficit widened notably, driven by considerable increase in imports that outpaced the growth in exports. Tourist arrivals continued the growth momentum in December with a notable increase over the previous month. Meanwhile, workers' remittances recorded a month-on-month growth in December 2021, mainly reflecting the response to incentive scheme introduced for remittances and the seasonal increase. The weighted average spot exchange rate in the interbank market continued to hover around Rs. 201 per US dollar during the month.

Trade Balance: The deficit in the trade account widened to highest ever monthly value of US dollars 1,085 million in December 2021, compared to the deficit of US dollars 562 million recorded in December 2020. The cumulative deficit in the trade account in 2021 also widened to US dollars 8,136 million from US dollars 6,008 million recorded in 2020. The major contributory factors to widen the trade deficit during 2021 are shown in Figure 1.

Terms of Trade: Terms of

trade, i.e., the ratio of the price of exports to the price of imports, improved by 4.6 per cent in December 2021, compared to December 2020, as the increase in export prices surpassed the increase in import prices. Meanwhile, the terms of trade for 2021 deteriorated by 7.8 per cent compared to the previous year.

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