February 02, Colombo (LNW): Sri Lanka’s trade deficit has grown significantly in 2024, reaching US$ 6 billion, up from US$ 4.9 billion in the previous year, according to the latest external sector report released by the Central Bank of Sri Lanka (CBSL).
Despite achieving the second-highest export earnings in the nation’s history, a substantial increase in import expenditure outpaced the growth in exports, resulting in a widening trade gap.
Sri Lanka’s merchandise exports saw a notable increase of 7.2 per cent year-on-year, amounting to US$ 12.8 billion in 2024.
This performance marks the second-largest annual export earnings ever recorded by the country. However, the positive trend in exports was not sufficient to offset the rise in import costs, which surged by 12.1 per cent to reach US$ 18.9 billion.
The growth in import expenditure was driven by an increase in all major categories, highlighting the country’s ongoing reliance on foreign goods and services.
The report also highlighted a net outflow of foreign investment in the government securities market, which amounted to US$ 179 million for the year.
Nevertheless, a recovery was observed towards the end of 2024, with a net inflow of US$ 18 million in December alone, suggesting a potential shift in investor sentiment.
In terms of foreign reserves, Sri Lanka saw a significant improvement in its gross official reserves (GOR), which increased to US$ 6.1 billion by the end of 2024, compared to US$ 4.4 billion at the close of 2023.
This rise in reserves was largely attributed to the Central Bank’s aggressive purchases of foreign currency from the domestic market, as well as funds received from international financial institutions.
The GOR also includes a US$ 1.4 billion currency swap facility with the People’s Bank of China, which was extended for another three years in December 2024.
Whilst Sri Lanka’s export sector showed resilience, the persistent trade imbalance and fluctuations in foreign investment remain challenges that the government and central bank will need to address in the coming year.
