Sri Lankan economy slows down as trade deficit widens and supply chain disrupts amidst lock down
The United States has sought to continue trade with Sri Lanka despite the serious impact of coronavirus on most of the business operations. The US Embassy in Colombo has requested the Government to let continue operations of businesses exporting key products to the US while taking health safety precautions. The US continues to be the single largest export destination for Sri Lankan products, purchasing approximately 26 per cent of its exports. The US is working with Sri Lanka to support production of medical supplies for use worldwide as part of the global response to COVID-19.
Meanwhile, India gifted a 10-tonne consignment of essential lifesaving medicines to Sri Lanka to help it battle with the coronavirus pandemic. The medicines provided by India were requested by Government of Sri Lanka. The consignment was brought to Sri Lanka by an Air India special charter flight.
All Free Trade Zones (FTZs) in the island nation have been indefinitely closed, but factories in low-risk areas and export processing zones are allowed to operate subject to health regulations during curfews. Excluding Colombo, Gampaha, Kalutara, Puttalam and other districts which are considered to be high risk, export factory owners in other areas can open up their factories, subject to health regulations.
Over 20,000 containers are stuck at the Colombo Port with perishables and other items as a result of the curfew imposed. The Customs Department said that over the past 16 days, 30,000 containers should have been released from the port under normal circumstances. However, only 8000 containers have been released. The Presidential Task Force to combat COVID – 19 has requested the Ceylon Association of Shipping Agents to grant certain concessions to importers and consignees owing to the current situation in the country. This includes waiver of the demurrage incurred by containers from March 16 until normalcy is restored in the country. The Sri Lanka Ports Authority, Colombo International Container Terminals, and South Asia Gateway Terminals have also been requested to waive storage charges and rent levied from shipping lines, consignees, importers and exporters.
Sri Lanka’s economy is expected to slow down in 2020, with exports, tourism, domestic services and industry down. Sri Lanka’s apparel exporters have said they could lose up to $1.5 billion in revenues during the June quarter. Sri Lanka’s trade deficit widened in January 2020 as earnings from exports declined while expenditure on imports increased. The trade deficit widened to $730 million in January 2020 compared to the deficit of $617 million recorded in January 2019. Earnings from merchandise exports declined 3.2 per cent in January 2020 to $1.005 billion compared with $1.038 billion in January 2019 with the decline in agricultural exports as well as industrial exports.
Earnings from tea exports declined 10 per cent due to the combined effect of lower export volumes and average export prices. Expenditure on merchandise imports increased, on a year-on-year basis, in January 2020 for the second consecutive month, by 4.8 per cent to $1.735 billion, driven by higher consumer and investment goods imports.
