Sri Lankan trade deficit for the six months ended June (1H’14) narrowed 20.1 percent to US $ 3.55 billion, driven by exports which grew by 16.8 percent YoY to Rs. 5.44 billion. However, the imports during 1H’14 edged down by only 1.2 percent YoY to US $ 8.99 billion.

The ongoing export push by all sectors supported the country’s external sector to continue narrowing its trade deficit, and in the month of June, the deficit contracted by as much as 35.3 percent to US $ 454 million but slowed from the previous month. In May, the trade deficit narrowed by 47.9 percent year-on-year (YoY) to US $ 393.4 million.

The government projects to have at least US $ 20.0 billion exports by 2020 with a possible trade surplus also supported by import substitution industries.

In June, exports grew by 22.0 percent to Rs.807.6 million helped by textiles and garments which grew by as much as 25 percent to US $ 446.2 million while the imports declined 4.6 percent YoY to US $ 1.44 billion due to reduction in oil imports.

The government targets an export income of US $ 5.0 billion by 2016 from this sector. This is more than 50 percent of the export basket but authorities have been contemplating on diversifying the product portfolio over many years.

Meanwhile the exports to European Union and United States grew by 34.6 percent and 12.1 percent respectively and exports to non-traditional markets grew by 44.5 percent.

Altogether industrial exports grew by 18.7 percent YoY to US $ 725 million in June and overall, agricultural exports grew by 33 percent YoY to US $ 256 million in June.

On imports in June, fuel imports declined 9.4 percent YoY to US $ 412.4 million. Furthermore, fertilizer imports declined by 54.5 percent YoY to US $ 14 million due to the drought weather conditions prevailing in the country and a substantial decline in international fertilizer prices due to a fall in natural gas prices.

The import of Intermediate goods which comprised the bulk of the import basket has declined by 7.5 percent YoY to US $ 891 million in June. Expenditure on consumer goods imports grew marginally by 1.2 percent YoY to US $ 277 million, while investment goods imports remained unchanged at US $ 270 million in the month of June 2014.