Sri Lanka's trade deficit widens sharply on oil import costs

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COLOMBO, Feb 16 (AFP): Sri Lanka's trade deficit widened by nearly six per cent to 3.56 billion dollars in 2007, the central bank said Friday, as the island spent more to import fuel.
Sri Lanka's imports jumped 10.2 per cent in 2007 to 11.30 billion dollars while exports climbed 12.5 per cent to 7.748 billion dollars, the central bank said.
The deficit was 3.37 billion dollars in 2006.
The Indian Ocean island, which imports all of its petroleum needs, said oil imports rose 20.6 per cent to 2.50 billion dollars as global prices reached record levels.
However, the outflow of foreign currency to pay import bills was offset by remittances from Sri Lankans working abroad, which produced an overall 531 million dollar balance of payments surplus in 2007, the central bank said.
Textiles and garments, the island's biggest earner, generated 3.34 billion dollars in 2007, a 8.5 per cent increase.
Sri Lanka, the world's third-biggest producer of tea, also said export earnings in the commodity rose 16.3 per cent to 1.02 billion dollars.
At the end of 2007, foreign currency reserves stood at 3.06 billion dollars, sufficient to cover three months of imports in the nation of 20 million people, the central bank said.
Sri Lanka's war-ravaged 27 billion dollar economy slowed down to 6.7 per cent in 2007, from an earlier forecast of 7.0 per cent, the central bank said as heavy fighting and high oil prices dampened demand.
The bank forecasts the economy to expand by 7.0 per cent in 2008.
However, international rating agency Fitch said last week the island's growth will slip to 5.8 per cent for the first time since 2004, as rising interest rates and record inflation crowd out private investment.
Sri Lanka pulled out of a tottering Norwegian-arranged truce with Tamil Tigers in January, signalling the country is headed back to all-out war.
More than 1,000 people have died since January, as troops try to advance into rebel-held areas in the north.
The rebels have hit back, setting off bombs in and around the capital of Colombo and government controlled areas in the south and northeast.