Robust inflows propel higher surplus in Balance of Payments

Wednesday, 26 March 2014 00:40 -     - {{hitsCtrl.values.hits}}

  • FDI in 2013 put at $ 1.42 b, up from $ 1.38 b in 2012
  • Long-term foreign loans by Govt. down to $ 1.75 b from $ 1.87 b
  • Banking sector net liabilities up to $ 1.78 b
  • Net inflows to Govt. securities at $ 155 m in January
  • Tourism earnings up 32% to $161 m in January
  • Gross official reserves at $8 b; total international reserves top $ 9 b
The Central Bank yesterday disclosed that favourable developments in January are expected to have resulted in a higher surplus in the Balance of Payments compared to a year earlier. “The contraction in the trade deficit, higher inflows on account of workers’ remittances and an increase in tourist earnings contributed to reducing the current account deficit. These developments together with continued inflows to the financial account are expected to have resulted in a higher surplus in the Balance of Payments (BOP) during January 2014, compared to the corresponding period of 2013,” it said in a statement. Earnings from tourism in BOP services account Tourist arrivals grew at a rate of 32.6%, year-on-year to 146,575 in January 2014. Earnings from tourism are estimated to have recorded a year-on-year growth of 32.2% during January 2014 to $ 161.2 million, compared to the earnings of $ 122.0 million during the corresponding month of 2013. The top five sources of tourist arrivals in January 2014 were India, UK, China, Russia and Germany, accounting for about 42% of tourist arrivals during the month. Current transfers in the BOP Workers’ remittances increased by 10.6%, year-on-year, to $ 555.5 million in January 2014 from $ 502.3 million in January 2013. The growth in remittances continues to be driven by increased labour migration in the professional and skilled categories. Financial account of the BOP Foreign Direct Investment (FDI) inflows to the Board of Investment (BOI) registered companies during 2013 amounted to $ 1,391 million. Meanwhile, non-BOI companies received FDI inflows amounting to $ 22 million in 2013, in addition to $ 7 million received in the form of direct investments in listed companies in Colombo Stock Exchange (CSE) which are not registered with the BOI. Accordingly, the total FDI inflows in 2013 amounted to $ 1,420 million compared to $ 1,382 million in 2012. In terms of sector wise investments, infrastructure, manufacturing and services sectors received the highest FDIs in 2013. Long-term loans obtained by the Government during 2013 amounted to $ 1,748.1 million, compared to $ 1,869.1 million recorded during the corresponding period in 2012. Meanwhile, with the enhanced presence of local banks in the international securities market, inflows to the Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs) increased resulting in a net increase in liabilities by $ 1,781 million in 2013. Further, net foreign inflows to the CSE in January 2014 amounted to $ 12.2 million of which inflows to the secondary market were $ 7.9 million, while inflows to primary market amounted to $ 4.3 million. Net inflows to the Government securities market during January 2014 amounted to $ 155 million, which comprised net inflows to Treasury bills and Treasury bonds amounting to $ 43.3 million and $ 111.7 million, respectively. Sri Lanka successfully issued the sixth international sovereign bond of $ 1 billion in January 2014. With a comparatively low yield of 6.0% per annum and a maturity of five years, the bond issue attracted an order book of over three times, reflecting continued investor confidence in the Sri Lanka’s economy. Overall BOP position During the month of January 2014, the overall BOP is estimated to have recorded a surplus of $ 733 million. This improvement in the overall BOP was achieved amidst the challenging global economic conditions prevailing during the period. International reserve position Sri Lanka’s gross official reserves (including Asian Clearing Union balances) amounted to $ 7.5 billion by end December 2013, while total international reserves, which also include foreign assets of the banking sector, amounted to $ 8.6 billion. In terms of months of imports, gross official reserves and total foreign assets were equivalent to 5.0 and 5.7 months of imports, respectively, at end December 2013. Further, with the favourable developments observed in the external sector, Sri Lanka’s gross official reserves amounted to $ 8.0 billion by end January 2014, while total international reserves, amounted to $ 9.2 billion. In terms of months of imports, gross official reserves and total foreign assets were equivalent to 5.3 and 6.1 months of imports, respectively, at end January 2014.