Sri Lanka's trade deficit, reflecting the negative balance in merchandise goods, has reportedly hit its lowest point since 2010.
This notable shift is attributed to a substantial decrease in imports throughout the previous year.
According to provisional data revealed by the Central Bank last week, Sri Lanka's exports amounted to US$ 11.9 billion in 2023, while imports stood at US$ 16.8 billion, resulting in a trade deficit of US$ 4.9 billion in the balance of payments for the year.
This marks a decline compared to the US$ 5.19 billion deficit in 2022 and the US$ 8.14 billion deficit in 2021, which played a significant role in the economic challenges faced in 2022.
The import restrictions, initially implemented in 2020 to conserve foreign currency amidst a tourism-related inflow loss due to the pandemic, intensified in the latter half of 2021. During this period, the impact of dwindling foreign currency reserves became evident, leading to shortages in essential commodities such as milk powder and subsequent price hikes.
In response to the economic strain, 2021 witnessed a high import bill of US$ 20.64 billion, decreasing to US$ 18.29 billion in 2022 through a combination of policies aimed at suppressing imports and preserving limited foreign currency.
Notably, officials implemented various monetary, fiscal, and exchange policies to curb demand, resulting in reduced import demand in 2023.
However, as the economy recovers with easing interest rates and improved sentiments, officials anticipate a potential uptick in imports and a slightly higher trade deficit in 2024. This increase is expected to be mitigated by strengthened services and current account inflows from tourism, remittances, and other service exports.
