"Textiles and garments exports rebounded by 8.5 per cent, year-on-year, recording US dollars 324 million in August 2009, recording the highest earnings by the sector during the year," the Central Bank said.

Food and beverages and other industrial exports were also improving.

Tea exports had grown 2.8 percent in August from a year earlier, with high prices. The average export price had reached 4.34 US dollars a kilo in 2009.

But agricultural exports, as a whole, which were 23.7 per cent of total exports, had fallen 7.4 per cent in August to weaker prices in other commodities such as rubber.

Coconut exports too, declined in terms of prices as well as volumes, from August 2008. Minor agricultural exports had fallen 25.1 percent and grew 34.0 percent in volumes with cocoa products, sesame seeds and pepper rising.

Mineral exports recorded a decline of 30.1 per cent, largely due to lower gem exports.

In the year to August exports were 4,551 million down 17.2 percent from the same period last year.

Total exports in August were 710 million, and had been growing from April.

"It is expected that exports will continue to increase during the remaining months of 2009 and in 2010, notwithstanding the uncertainties on the continuation of GSP+ concessions," the Central Bank said.

GSP + an import tax concession from the Euro area may be lost to Sri Lanka over non-compliance with international conventions on civil and political rights and concerns over human rights and the implementation of rule of law.

The central bank said weakening Euro and Sterling, may help Sri Lanka. The Sri Lanka rupee is pegged to the US dollar at 114.80/90 levels.

The import bill had fallen with weaker oil and fertilizer prices. The average import price of crude oil declined by 47.2 percent to 67.52 US dollars per barrel in August 2009, from US dollars 127.96 per barrel in August 2008.

The average fertilizer import price has declined by 67.7 per cent to US dollars 344 per metric ton during this period.

But textile and clothing imports, which are used as inputs for apparel exports, increased by 7.7 per cent to 120 million in August, US dollars pointing higher apparel exports in coming months.

Spending on investment goods had fallen 30.8 per cent to 150 million US dollars.

Imports for August were 826 million US dollars down 34.6 percent.

In the eight months to August imports had fallen 35.2 per cent to 6,179 million US dollars against 2008.

The trade deficit had contracted 76.9 percent to 116 million US dollars in August. From the beginning of the year, the deficit was down 59.6 percent to 1,627 million US dollars.

Worker remittances had increased 9.9 percent to 2,195 million US dollars.

Sri Lanka has a pegged exchange rate and capital controls, causing worker remittances which increase the spending power in the economy to automatically increase the trade deficit.

However the deficit can narrow or reverse if there are net capital outflows from debt repayments, or contractionary sterilization activities of the Central Bank following forex purchases.

The Central Bank said it had bought 2,529.3 million US dollars from forex markets so far this year, and there were strong capital inflows to Treasuries markets.