Sunanda Bandara bowls a wide on the widening trade deficit

Fact Check

Former presidential advisor Sunanda Madduma Bandara, in his statement, attributed the widening trade deficit to the recent relaxation of import bans (excluding vehicles).

To verify this claim, FactCheck.lk consulted External Sector data from the Central Bank of Sri Lanka (CBSL) and the Export Development Board (EDB).

FactCheck.lk evaluated the claim on three fronts.

(1) Did the trade deficit increase as claimed?

CBSL data confirms that the trade deficit did increase by USD 859 million from January to September 2024 compared to 2023. However, this figure is USD 282 million less than the former advisor’s stated increase of USD 1,141 million.

(2) Was the increase due to declining exports or rising imports?

The trade deficit is calculated as imports minus exports. CBSL data shows that exports rose by USD 536 million to reach USD 9,518 million during the period of January–September 2024, compared to the same period in 2023. This increase helps reduce the trade deficit. However, imports increased the trade deficit—rising by USD 1,395 million to USD 13,718 million during the same period.

(3) Is the trade deficit driven by imports of products where restrictions were lifted?

The increase in imports is not primarily due to the removal of restrictions. A FactCheck.lk analysis based on EDB data shows that USD 724 million (60%) of the import increase came from other products that were never restricted or those whose restrictions have not been yet lifted. Only USD 479 million of the increase (40%) was from products subjected to restrictions, which were later removed.

The former presidential advisor makes two mistakes in his statement: (1) he overstates the increase in the trade deficit by over 30%, and (2) he attributes it to the increase in imports of restricted goods, when most of the import increase was because of other goods—without which there would have been no increase in the trade deficit.

Therefore, we classify the former presidential advisor’s claim as FALSE.

*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.

Additional note 1: To better assess the impact of lifting import restrictions, we analysed import expenditure for the period from January to September in 2023 and 2024 at the HS Code* 8-digit level. Products were categorised into two categories:

1. Products that faced some form of restriction between 2020 and 2024 (including import bans, temporary suspensions, import control licenses and credit basis) which were subsequently removed, and
2. Other products (that were not subjected to any restrictions or whose restrictions have not yet been lifted).

*HS Code is a standardised code used to identify products in international trade. It is administered by the World Customs Organisation and is used globally to consistently classify and describe products.

Exhibit 1:  Contribution to Import Growth