Earnings from exports in 2022 surpassed USD 13 billion per year for the first time, recording an increase of 4.9% from the previous highest recorded in 2021, the Central Bank of Sri Lanka (CBSL) says.

This improvement was a result of increased earnings from industrial exports, including garments, gems, diamonds and jewellery, machinery and mechanical appliances and petroleum products.

Meanwhile, total import expenditure in 2022 amounted to USD 18,291 million, recording a decline of 11.4%, year-on-year, resulting from measures to restrict non-urgent imports and liquidity constraints that prevailed in the market for the most part of 2022.

As a result, the deficit in the trade account in 2022 narrowed to the lowest level since 2010 to USD 5,185 million, from USD 8,139 million recorded in 2021.

According to the CBSL, major contributory factors for the decline in the cumulative trade deficit in 2022 were textile garments; gems, diamonds and jewellery; transport equipment; telecommunication devices; building material; medical and pharmaceuticals; base metals; and machinery and equipment.

The deficit in the merchandise trade account narrowed to USD 358 million in December 2022, from USD 1,085 million recorded in December 2021, helped by a larger decline in imports, compared to the decline in exports.

Meanwhile, earnings from merchandise exports declined by 7.7% in December 2022, over December 2021, to USD 1,068 million. The decline in earnings from industrial exports mainly contributed to the decline in export earnings in December 2022.

According to the CBSL, expenditure on merchandise imports declined by 36.4% in December 2022 to USD 1,426 million, compared to USD 2,241 million in December 2021, continuing the year-on-year declining trend observed since March 2022. The higher base in December 2021 and declines in volumes across all major categories resulted in this outcome.

Workers’ remittances in 2022 amounted to USD 3,789 million, in comparison to USD 5,491 million in 2021, recording a decline of 31.0%, though a notable recovery was witnessed during the latter part of the year.

Meanwhile, workers’ remittances increased to USD 476 million during December 2022, in comparison to USD 384 million in the previous month, recording the highest monthly remittances during 2022.

Total departures for foreign employment during 2022 were recorded at 299,934, contributed mainly by the unskilled (101,786), skilled (88,215) and domestic aid (73,781) categories. Total departures for foreign employment were recorded at 23,407 during the month of December 2022.

The CBSL stated that a total of 719,978 tourist arrivals were recorded in 2022, compared to 194,495 arrivals in 2021, recording the highest tourist arrivals after 2019.

Tourist arrivals increased notably in December 2022 to 91,961, from 59,759 arrivals recorded in November 2022. Russia, India, the United Kingdom, Australia, and Germany remained the main source countries for tourist arrivals in December 2022.

Earnings from tourism are estimated at USD 1,136 million in 2022, compared to USD 507 million in 2021. Earnings from tourism in the month of December 2022 are estimated at USD 127 million, in comparison to USD 81 million in the previous month and USD 233 million in the corresponding month in the previous year.

Foreign investments in the government securities market recorded a cumulative net inflow of USD 51 million during 2022, with a marginal net inflow in December 2022.

Meanwhile, on a cumulative basis, the Colombo Stock Exchange (CSE), including primary and secondary market transactions, recorded a net inflow of foreign investments amounting to USD 182 million in 2022. The foreign inflows to the CSE, including primary and secondary market transactions, recorded a notable net inflow in December 2022.

The exchange rate remained stable through December 2022, following the introduction of daily permissible band from mid-May 2022. Annual depreciation of the rupee in 2022 was 44.8% against the US dollar, and reflecting cross-currency movements, the Sri Lanka rupee depreciated against the euro, the Australian dollar, the Indian rupee, the pound sterling, and the Japanese yen in 2022.

Meanwhile, the rupee recorded an appreciation of 0.3 per cent against the US dollar during the year up to 31 January 2023. Reflecting cross-currency movements, the Sri Lanka rupee depreciated against the euro, the pound sterling, the Indian rupee, the Australian dollar, and the Japanese yen during the year up to 31 January 2023.

The real effective exchange rate (REER 24) depreciated notably during Mar-May 2022 and remained largely below the threshold of 100 index points, indicating an improvement in Sri Lanka’s external competitiveness.

External Sector Performance – December 2022 by Ada Derana on Scribd