Sri Lanka's trade deficit in February 2014 narrowed by 20.7 percent to US$ 504 million as earnings from exports substantially increased while expenditure on imports declined during the month, the Central Bank said Monday releasing the External Sector Performance review.

Earnings from exports in February 2014 increased significantly on a year-on-year (YoY) basis by 5.4 percent to US$ 841 million, while expenditure on imports declined by 6.2 percent to US$ 1.345 billion.

The cumulative trade deficit for the first two months of 2014 contracted by 12.5 percent, as the growth in export earnings of 13.9 percent outpaced the 1.1 percent increase in import expenditure.

Improved performance in agricultural exports, followed by industrial exports, led the significant growth in exports.

Earnings from agricultural exports increased 15.3 percent for February to US$ 201 million, out of which tea exports increased by 11.7 percent and amounted to US$ 116 million.

Earnings from industrial exports, which account for more than three fourths of total export earnings increased by 2.5 percent, year-on-year, to US$ 637 million in February 2014, reflecting an increase in earnings from export of textiles and garments by 6.6 percent to US$ 396 million.

Expenses on fuel imports increased marginally by 0.6 percent to US$ 421 million in February compared to same month in 2013 and expenses in most of other categories declined.

During the month Workers' Remittances grew by 6.9 percent to US$ 502.0 million and earnings from tourism increased 33.6 percent to US$ 205.0 million. However, inflows to the government from Treasury Bills and Bonds declined 71.8 percent YoY and only earned US$ 202.5 million.

By the end of 2013, Sri Lanka's gross official reserves amounted to US$ 8.3 billion, while total international reserves, which include foreign assets of commercial banks, amounted to US$ 9.4 billion.

The domestic foreign exchange market has remained relatively stable during the year so far up to 22 April 2014, with the rupee marginally appreciating by 0.11 percent against the US dollar, the Central Bank said.