The merchandise trade balance recorded a surplus in June 2022 for the first time since August 2002, reflecting the impact of historically high monthly export earnings and the continued decline in import expenditure.

Earnings from tourism recorded an increase in June 2022 (year-on-year) from the low base, despite the negative sentiments associated with travel advisories and the ongoing shortage of fuel and resultant transportation difficulties.

Workers’ remittances moderated in June 2022, compared to May 2022, reflecting an increase of grey market activity of foreign exchange transactions. Foreign investment in the government securities market recorded a marginal net inflow, while that in the Colombo Stock Exchange (CSE) recorded a marginal net outflow during June 2022.

The Central Bank continued to provide forex liquidity to finance essential imports, exhausting the usable level of gross official reserves.

Meanwhile, the weighted average spot exchange rate in the interbank market remained around Rs. 360 per US dollar during the month.

Merchandise Trade Balance and Terms of Trade

Trade Balance: The balance in the merchandise trade account in June 2022 recorded a surplus of US dollars 21 million, compared to the deficit of US dollars 652 million recorded in June 2021, and for the first time since August 2002, where a trade surplus of US dollars 110 million was recorded. Meanwhile, the cumulative deficit in the trade account during January-June 2022 narrowed to US dollars 3,514 million from US dollars 4,316 million recorded over the same period in 2021. The major contributory factors for the decline in the cumulative trade deficit are shown in Figure 1.

Terms of Trade: Terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 5.4 per cent in June 2022, compared to June 2021, as the increase in import prices surpassed the increase in export prices.