Responding to policy measures adopted earlier in the year to curb imports, Sri Lanka's trade deficit in 2012 declined by 4.1 percent to US$ 9.3 billion compared to 2011 despite the decline in export earnings.
The Central Bank in its External Sector Performance report released Monday said although expenditure on imports of investment goods increased, imports of consumer goods and intermediate goods declined steadily from around April 2012 in response to the measures taken by the government and the Bank to curb the rising trade deficit.
Earnings from exports also declined in 2012 along with the weakening of global demand but the deficit in the trade account of the balance of payments contracted in 2012, the Central Bank said.
Earnings from exports declined in December 2012, as earnings from industrial exports declined but, agricultural exports, especially, tea exports have performed well.
Sri Lanka's tea exports have fetched favorable prices since around May 2012 and have therefore helped to maintain export earnings during much of the year, the Bank stated.
Expenditure on imports, especially food imports and vehicles declined considerably in December 2012. Following the government's measure to impose heavy taxes on motor vehicles and raise fuel prices in February 2012, import expenses have continued to drop.
In 2012, export earnings declined by 7.4% earning US$ 9.77 billion while import expenses declined by 5.8% amounting to US$ 19.09 billion.
Earnings from tourism increased 25.1% to US$ 1.038 billion with tourist arrivals totaling 1,005,605 in 2012, a growth of 17.5 per cent.
Inflows to the government, which include Treasury Bills and investments at the Colombo Stock Exchange, increased 20.8% in the year to bring in US$ 5.257 billion.
Gross official reserves amounted to US$ 6.877 billion, while total international reserves which include gross official reserves and foreign assets of commercial banks, amounted to US$ 8.358 billion by end 2012.