Sri Lanka’s trade deficit doubled to a record $9.74 billion in 2011 year-on-year as increased imports of oil, consumer goods and capital items outpaced growth in exports, the central bank said on Friday. The trade gap in December widened 43.5 per cent year-on-year to a record $1 billion.
Imports for the full year jumped 50.4 per cent to a record $20.23 billion, while exports gained 22.4 per cent to $10.49 billion. The imports rose 33.7 per cent in December to $1.91 billion, while exports rose 24.3 per cent to $905.5 million.
The island nation’s foreign exchange reserves, which the central bank spent to defend the rupee currency, fell 3.9 per cent to $5.96 billion from $6.2 billion a month ago.
Meanwhile, Sri Lanka expects crude imports from Iran to drop by at least 10 per cent this year due to a range of inflation-fighting policies that should cool demand, potentially helping it find a way around US sanctions, a government official said on Friday.
The Indian Ocean island nation is facing one of the biggest squeezes from the impending sanctions, despite being a small player in the world crude market, since its sole refinery can only process Iranian crude and a handful of others. In the last month, Sri Lanka has increased interest rates for the first time since 2007 to avert a looming balance-of-payments crisis, raised state-controlled fuel prices by as much as 37 per cent, and stopped defending the rupee currency “We’re quite confident there will be a reduction in the quantity of oil we purchase because of our new policies,” the official told Reuters on condition of anonymity.
“Our own view is that it will reduce by at least 10 per cent, and that will satisfy both parties,” the official said. He expected the 10 per cent reduction would be year-on-year.
That could give Sri Lanka some leverage to argue it has reduced ties with Iran, and followed in the footsteps of India, China and Japan, the official said.
All three plan cuts of 10 per cent or more, and South Korea is in talks to trimming ties with Tehran. The United States has said that is a precursor to any waiver from the sanctions, which would lock violators out of the US financial system.