Trade deficit can be managed - CB

Sri Lanka can manage its trade deficit this year despite a record fuel import bill due to improved foreign exchange inflow, but inflation would be a concern, the Central Bank Governor said yesterday.

The island nation recorded a 5.6 percent rise in its trade deficit to $3.56 billion last year compared to 2006, and predicted a 11.5 percent increase to $3.97 billion in 2008 estimating the average fuel price to be $85 per barrel. But on Thursday, crude oil price hit a record over $145 per barrel.

However, Governor Ajith Nivard Cabraal said the rapid oil price increase will be compensated by additional foreign inflows, thus pressure on trade deficit will be at a minimum.

“I don’t think the trade deficit will become unmanageable, because we are seeing remittances growing quite fast,” Ajith Nivard Cabraal told Reuters.

“Our foreign exchange balancing will not be as critical as we originally thought. Also, prices for tea and rubber have also improved. so that is taking some parts of the slap.” Cabraal, however said, the oil bill is taking its toll of the island nation’s import bill for 2008, which was a record $2.49 billion last year.

Thomson Reuters