For fourth consecutive month:

Trade deficit contracts by 75.9 percent

Year-on year, Sri Lanka’s trade deficit contracted for the fourth consecutive month in April 2009 by 75.9 percent to US dollars 167 million.

Although both earnings from exports and expenditure on imports, declined during the month, the reduction in imports outweighed the reduction in exports, largely due to the lack of demand for imported goods and the lower import prices compared to those that prevailed at around this time of the year, last year, in the midst of an international commodity price boom, a media release from the Central Bank said.

The cumulative trade deficit decreased by 61.5 percent to US dollars 806 million during the first four months of 2009 from US dollars 2,091 million in the corresponding period of 2008.

Private remittances, reached US dollars 1,034 million during the first four months of 2009, compared to US dollars 1,047 million in the corresponding period of 2008. As a result, remittances during the first four months were US dollars 228 million (about 28 percent) in excess of the trade deficit.

Export earnings dropped by 28.2 percent in April 2009, to US dollars 438 million, reflecting reductions in all major sectors, the release said.

Within the agricultural exports, however, tea continued to perform well, in terms of prices. At US dollars 3.99 per kg, the export price of tea was almost on par with the US dollars 4.00 it fetched around this part of the year last year at the height of the commodity price boom.

The reduction in earnings from tea exports in April, however, was largely due to the lower export quantities, which could be attributed to lower global demand, and the effect of drought conditions.

Earnings from exports of coconut kernel increased by 34.8 percent to US dollars 3 million despite the 43.4 percent decline in the prices. Earnings from rubber exports decreased by 36.1 percent in April, despite the 16.7 percent increase in export volumes, largely due to the significant decline in export prices over the corresponding period last year, when natural rubber was attracting a premium price.

Among the industrial exports, the earnings from the textiles and garments sub sector declined by 10.1 percent to US dollars 227 million in April 2009.

Despite the confidence expressed by the industry of having confirmed orders, some orders were cancelled or postponed amidst uncertainties about the strength and duration of the global economic downturn.

Demand from the European Union declined by 17.6 percent to US dollars 103 million while demand from the US picked up by 4.4 percent to US dollars 103 million during April 2009. The cumulative earnings from exports declined by 16.2 percent to US dollars 2,085 million.