The trade balance of a country’s national accounts is the difference between the amount of goods and services exported and the amount of goods and services imported. If a country’s exports exceed imports, this is shown as an advantageous balance and if it’s more than imports and exports, it is shown as a negative balance. This is often expressed as a percentage of a country’s GDP.
Sri Lanka has had an unfavorable trade balance for a long time. This is mitigated to some extent by other receipts, especially remittances and tourism income from expatriate workers. When Messiah is added, it is called the current account. Sri Lanka’s current account also has a deficit of Rs.
The country’s gross domestic product marks the size of the country’s economy. Export earnings, trade deficit and current account deficits as a percentage of the country’s economy are shown in the charts below. In 2000, Sri Lanka’s export earnings accounted for 39% of GDP and in 2010 it was 20%. This is due to the reduction in the trade balance deficit in the current balance, especially due to remittances from foreign workers.
Sri Lanka can take two steps to reduce its trade balance. One is to reduce imports. The other is to increase exports. Taking action to reduce imports is a protectionist policy and taking action to increase exports is an aggressive policy. Sri Lanka should not choose a protectionist policy at this juncture. An offensive policy.
If a country’s imports can be produced in that country, it is worthwhile. There is nothing wrong with that. But it is difficult for a government to do both at the same time in formulating its policies. Better if you can do both somehow. If one of the two is to be chosen, the offensive policy must be chosen.
This is why. There is no limit to export growth. There is a limit to import substitution. That is the market size of the country. The exporters in this country and the state should be prepared for this. At the same time, the growth of exports requires the support of all citizens of the country, including the government and the business community, as well as all institutions and the opposition. For this, the country needs to identify industries that have more energy. Information technology is an example of this. For that, manpower must be trained. Institutions must be created. Calling a conference and announcing policies alone will not do everything. They need to be implemented. The policies of such a country are not automatically implemented.
It is difficult for a small country like Sri Lanka with a small market to move towards rapid development without trade. Depending on the geographical location of Sri Lanka, Sri Lanka can act as a hub for trade. That is what has happened throughout the history of this country. If Sri Lankan businessmen do not target the small Sri Lankan market but the entire world market, the country can expect greater economic benefits.
Vietnam was a war-torn country and the war ended in 1975. From 1986 to 2019, the country’s exports grew rapidly. This can be compared with the first graph of Sri Lanka’s exports. Vietnam is a good example of an aggressive policy of export growth. The current chart shows the current account balance. This shows that with exports, imports also increase and the country’s trade increases. The current account balance shows a surplus in recent years.