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Tuesday, 18 October 2016 00:12 - - {{hitsCtrl.values.hits}}
Sri Lanka’s July trade deficit shrank 10% from a year earlier to $ 541.6 million, data released by the Central Bank showed as exports continued their decline, reducing 4.4% to $ 891million, and imports contracted 6.6% to $ 1.4 billion compared to the same period in 2015.
Continuing the year-on-year declining trend, which began in March 2015, earnings from exports declined by 4.4%, year-on-year, to $ 891 million in July 2016 from $ 932 million in July 2015. The subdued performance in agricultural and industrial exports, owing to lower international commodity prices and lower domestic supply, mainly contributed to this decline.
“Export earnings from tea dropped by 14.8%, year-on-year, to $ 108 million in July 2016, due to lower demand, particularly from Russia and Middle Eastern countries, although tea exports to Iran increased in comparison to July 2015,” the report said.
Further, earnings from the export of spices declined significantly by 31.8%, year on-year, mainly due to the poor performance of pepper as a result of low domestic supply, although cinnamon and nutmeg and mace exports showed a considerable growth, year-on-year, in July 2016. In addition, export earnings from petroleum products decreased by 24.7 %, year-on-year, during the month owing to the combined effect of lower bunkering quantities and average bunkering prices.
“Earnings from seafood exports declined, year-on-year, both in terms of export value and volume in July 2016.
However, earnings from seafood exports to the EU grew by 19.9%, year-on-year, mainly as a result of the removal of the fish ban imposed by the EU on Sri Lanka, with effect from end June 2016. In contrast, earnings from textiles and garments exports, which account for around 48% of total export earnings, grew by 3.0%, year-on-year, to $ 426 million, due to higher garment exports to the EU and non-traditional markets such as Canada, China, Australia and the UAE.”
Further, reflecting a higher performance in the footwear and travel goods subcategories, export earnings from leather, travel goods and footwear grew substantially in July 2016 while earnings from machinery and mechanical appliances, base metals and articles and vegetables exports also increased when compared to the corresponding month of 2015.
The report went on to say on a cumulative basis, earnings from exports during the first seven months of 2016 contracted by 5.6%, year-on-year, to $ 5,999 million mainly due to reductions in export earnings from transport equipment, petroleum products, tea and spices. The leading markets for merchandise exports of Sri Lanka during the first seven months of 2016 were the US, UK, Germany, India and Italy accounting for about 53% of total exports.
Meanwhile, expenditure on imports contracted by 6.6%, year-on-year, to $ 1,433 million in July 2016 compared to $ 1,534 million in July 2015. A significant decline in expenditure on vehicle imports, followed by fuel and wheat imports, contributed largely to this reduction. Reflecting the impact of policy measures adopted by the Government to curtail vehicle imports, import expenditure on personal motor vehicles, categorised under consumer goods, and transport equipment, categorised under investment goods, declined significantly by 63.7% and 29.4%, respectively in July 2016, year-on-year.
Importation of motor cars, hybrid electric vehicles, motorcycles, buses, agricultural tractors and autotrishaws declined significantly during the month. Import expenditure on fuel declined by 18.6%, year-on-year, to $ 142 million during the month mainly due to the drop in average import prices of crude oil and coal together with the significant reduction in import volumes of refined petroleum products.
In line with the drop in oil prices in the international market, the average import price of crude oil declined to $ 46.10 per barrel in July 2016 from $ 50.95 per barrel in the previous month and $ 60.49 per barrel in July 2015.
Additionally, import expenditure on wheat declined significantly by 70.5%, year-on-year, in July 2016, mainly due to reductions registered in import volumes and the prices of wheat. In addition, chemical products, base metals, agricultural inputs, vegetables, dairy products and rice contributed significantly towards reducing the overall import expenditure during the month. However, import expenditure on machinery and equipment and building materials increased noticeably by 25.4% and 14.4%, respectively on a year-on-year basis in July 2016, reflecting increases in almost all subcategories.
Further, expenditure on mineral product imports increased significantly by 125.4%, year-on-year, in July 2016 mainly due to higher imports recorded in cement clinkers. In addition, gold imports increased noticeably during the month due to the high quantum of gold imported and the non-importation of gold during the corresponding month of the previous year. Meanwhile, import expenditure on medical and pharmaceuticals, home appliances, cosmetics and toiletries and clothing and accessories increased in July 2016.
On a cumulative basis, expenditure on imports during the first seven months of 2016 contracted by 2.9% to $ 10,754 million, mainly due to reductions recorded in fuel, vehicle and rice imports. During the first seven months of 2016, the main import origins were China, India, Singapore, Japan and the UAE, accounting for about 57% of total imports.
Foreign investments at the CSE recorded a net inflow of $ 10.1 million in July 2016. However, the cumulative foreign investments in the CSE up to end July 2016 recorded a net outflow of $ 30.8 million, including net outflows to the secondary market amounting to $ 32.2 million and inflows to the primary market amounting to $ 1.4 million. Continuing the trend observed from the latter part of April 2016, the government securities market recorded a net inflow of $ 238.5 million in July 2016.
However, cumulative foreign investments to the government securities market during the first seven months of 2016 recorded a net outflow of $ 133.3 million compared to a net outflow of $ 424.7 million during the corresponding period of 2015. The financial account further strengthened with the proceeds from the Syndicated Loan facility amounting to $ 300 million. During the first seven months of 2016, long-term loans to the Government recorded a net outflow of $ 22.0 million compared to a net inflow of $ 169.9 million during the first seven months of 2015.
During the first seven months of 2016, the overall BOP is estimated to have recorded a surplus of $ 356.0 million, compared to a deficit of $ 1,229.6 million recorded during the corresponding period of 2015.
Sri Lanka’s gross official reserves increased to $ 6.5 billion by end July 2016 with the proceeds from the dual tranche international sovereign bond issuance and the Syndicated Loan facility. The gross official reserves were equivalent to 4.2 months of imports, while total foreign assets at $ 8.9 billion were equivalent to 5.7 months of imports.
The rupee recorded a depreciation of 1.9% against the US dollar during the period from end 2015 to 14 October 2016. Reflecting cross currency movements, the rupee also depreciated against the euro by 3.0%, the Japanese yen by 15.5%, the Canadian dollar by 6.7%, the Australian dollar by 5.8% and the Indian rupee by 1.4% during this period while appreciating against the pound sterling by 18.8%.
Cumulative earnings from tourism increased to $ 1,945.2 million during the first seven months of 2016 compared to $ 1,667.1 million recorded during the same period in 2015.
Tourist arrivals stood at 209,351, recording a growth of 19.1% year-on year, in July 2016.
Accordingly, tourist arrivals during the first seven months of 2016 increased by 16.7% to 1,173,618 in comparison to the corresponding period of 2015. The top five sources of tourist arrivals in July 2016 were China, India, the UK, Germany and France, accounting for 49.8% of the total during the month.
Workers’ remittances declined by 4.4%, year-on-year, to $ 572.8 million in July 2016 from $ 599.3 million in July 2015.
The decline in workers’ remittances can be mainly attributed to the prevailing economic stagnation in Middle Eastern countries and lower migration under the unskilled categories.
However, the cumulative inflow from workers’ remittances increased by 3.8% to $ 4,185.9 million during the first seven months of 2016 in comparison to the corresponding period of 2015.
