Sri Lanka's external sector exhibited a mixed performance in April 2021. The deficit in the trade account widened for the second consecutive month in April 2021 compared to a year earlier while earnings from the tourism sector remained subdued. Notably, both exports and imports were significantly higher in April 2021, compared to April 2020, although both were lower compared to March 2021. However, workers' remittances continued its momentum, recording a significant growth in April 2021. Meanwhile, the financial account of the balance of payments strengthened during the month with the receipt of the proceeds of the syndicated loan facility from the China Development Bank. The Sri Lankan rupee remained broadly stable throughout the month, amidst some volatility observed in mid April.

Trade Balance and Terms of Trade

Trade Balance: The deficit in the trade account widened for the second consecutive month in April 2021 to US dollars 889 million compared to the deficit of US dollars 840 million recorded in April 2020 and US dollars 832 million in March 2021. Both exports and imports were significantly higher in April 2021, compared to the lockdown period in April 2020, although both were lower compared to March 2021. Meanwhile, the cumulative deficit in the trade account during January – April 2021 widened to US dollars 2,948 million from US dollars 2,693 million recorded over the same period in 2020. The major contributory factors for this outcome 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 5.5 per cent in April 2021 as the increase in import prices were higher than the increase of export prices, compared to April 2020.