The deficit in the trade account widened on a year-on-year basis for the fourth consecutive month in June 2021. Both exports and imports were significantly higher in June 2021 compared to June 2020. Considering the first half of the year, although exports recorded a healthy growth, import expenditure increased at a higher pace, according to a media release by the Central Bank. Workers’ remittances recorded a year-on-year decline in June 2021, while earnings from tourism remained at minimal levels.
In the financial account, both foreign investment in the government securities market and the Colombo Stock Exchange (CSE) continued to record marginal net outflows during the month. The Sri Lankan rupee remained broadly stable in June 2021
The deficit in the trade account widened on a year-on-year basis to US dollars 652 million in June 2021 compared to the deficit of US dollars 161 million recorded in June 2020.
The cumulative deficit in the trade account in the first half of the year also widened to US dollars 4,316 million from US dollars 3,262 million recorded in the corresponding period in 2020, and US dollars 3,597 million recorded in the corresponding period in 2019. The major contributory factors for this outcome 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, deteriorated by 16.7 per cent in June 2021 compared to June 2020, as the increase in import prices were higher than the increase of export prices, compared to June 2020.
Earnings from merchandise exports in June 2021 recorded an increase of 12.6 per cent to US dollars 1,007 million on a year-on-year basis. Cumulative export earnings from January to June 2021 amounted to US dollars 5,699 million, compared to US dollars 4,413 million recorded in the corresponding period in 2020 and US dollars 5,999 million recorded in the corresponding period in 2019. Exports improved by 12.9 per cent in June 2021 over May 2021.