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Imports continue to rise despite restrictions and forex shortage bloating the country’s trade deficit, as per latest data.
Imports in the first nine months of the year have risen by 27% to $ 14.93 billion and the trade deficit crossed the $ 6 billion mark, as against $ 4.3 billion in the corresponding period of last year.
The ballooning trade deficit is despite a healthy 20% growth in exports to $ 8.9 billion in the first nine months of 2021.
The Central Bank said the merchandise trade deficit narrowed to $ 495 million in September 2021, compared to $ 525 million in September 2020. Earnings from exports continued to record values in excess of $ 1 billion for the fourth consecutive month in 2021 while import expenditure remained at almost the same level as in September 2020.
It said the deficit in the trade account narrowed to $ 495 million in September 2021, compared to the deficit of $ 525 million recorded in September 2020 and $ 586 million recorded in August 2021. However, the cumulative deficit in the trade account widened from January to September 2021 to $ 6,003 million from $ 4,337 million in the corresponding period of 2020.
Terms of trade, i.e., the ratio of the price of exports to the price of imports, deteriorated by 15.6% in September 2021, compared to September 2020, as the increase in import prices surpassed the increase in export prices.
Overall exports: Earnings from exports in September 2021 grew by 3.1% over September 2020 to reach $ 1,031 million. An increase in earnings was observed in industrial and mineral exports, while a decline was recorded in agricultural exports. Cumulative export earnings, which increased by 20% during January-September 2021, amounted to $ 8,934 million, compared to $ 7,445 million recorded in the corresponding period in 2020.
Meanwhile, the mismatch between the goods flow and the financial flow in relation to merchandise exports was observed during the month of September 2021 as well.
Industrial exports: Earnings from the export of industrial goods increased by 4.0% in September 2021, compared to September 2020. While the major export segments, such as garments, petroleum products, and rubber products, recorded substantial increases in earnings, a decline in earnings was reported by few minor segments, such as plastics and articles (mainly plastic clothing articles); printing industry products; gems, diamonds and jewellery; food, beverages and tobacco (mainly manufactured tobacco); leather, travel goods and footwear; and ceramic products.
Exports of garments to all major markets increased, except the UK. Earnings from the export of petroleum products increased mainly due to the increase in bunker fuel exports reflecting higher prices. Tyres and gloves led the increased export earnings from rubber products.
Agricultural exports: Total earnings from the export of agricultural goods in September 2021 decreased by 0.6%, compared to September 2020, mainly due to the decrease in export earnings from tea, unmanufactured tobacco, spices, and vegetables. Earnings from tea exports decreased by 8.7% (y-o-y), due to lower export prices (by 5.8%) as well as a decline in export volumes (by 3%) in September 2021. Export earnings from spices, including cinnamon, nutmeg and mace, decreased, driven by lower export volumes, although earnings from pepper and cloves increased.
Meanwhile, export earnings with respect to seafood (mainly shrimps, and prawns, and tunas), rubber (mainly crepe rubber) and minor agricultural products (mainly edible nuts) increased in September 2021.
Mineral exports: Earnings from mineral exports increased in September 2021, compared to September 2020, due to high earnings from all sub categories, namely; earths and stone; ores, slag and ash; and precious metals.
Export indices: The export volume index decreased by 2.7%, and export unit value index increased by 6.0%, (y-o-y), in September 2021. This indicates that the increase in export earnings in September 2021 was due to higher export prices.
Overall imports: Expenditure on merchandise imports in September 2021 amounted to $ 1,526 million, around the same level recorded in September 2020. An increase in import expenditure was observed in consumer goods, while a decline was recorded in intermediate goods and investment goods. On a cumulative basis, total import expenditure from January to September 2021 amounted to $ 14,938 million, compared to $ 11,782 million recorded in the corresponding period in 2020.
Consumer goods: Expenditure on the importation of consumer goods in September 2021 increased by 16.6% over September 2020, led by higher expenditure on non-food consumer goods.
Expenditure on food and beverages imports declined by 12.4% in September 2021 (y-o-y), mainly due to the decline in sugar imports. In addition, declines were observed in seafood (mainly dried and fresh fish), spices (mainly chillies and coriander seeds), fruits, and beverages. An increase in import expenditure was observed in dairy products (mainly milk powder), vegetables (mainly lentils and potatoes), and, oils and fats.
Meanwhile, expenditure on the importation of non-food consumer goods increased by 42.2% (y-o-y), mainly owing to the importation of vaccines, categorised under medical and pharmaceuticals. Several other categories of non-food consumer goods, including telecommunication devices, clothing and accessories, rubber products (mainly tyres), and household and furniture items (mainly textile articles) also increased.
Intermediate goods: Expenditure on the importation of intermediate goods in September 2021 decreased by 4.0% over September 2020, driven by fuel, wheat (mainly wheat grain), mineral products (mainly cement clinkers), and fertiliser, despite a significant increase in import expenditure on textiles and textile articles.
Expenditure on fuel declined in September 2021 due to non-importation of crude oil and low import volumes of refined petroleum driven by the availability of sufficient stocks. However, despite lower import volumes, expenditure on refined petroleum imports (including LP gas) increased, reflecting the increase of average import prices by 64.6% (y-o-y) in September 2021. Expenditure on coal imports also increased notably with higher import volumes and prices.
Investment goods: Expenditure on the importation of investment goods decreased by 2.1% in September 2021, compared to the same month in 2020. A notable decrease in import expenditure under machinery and equipment was recorded due to the decline in expenditure on machinery and equipment parts, and cranes. Meanwhile, import expenditure on building materials increased, owing to mineral products (primarily asbestos); ceramic products; and insulated wires and cables; and iron and steel, while expenditure on cement declined due to lower import volumes. Transport equipment recorded an increase, mainly due to the importation of railway related equipment.
Import indices: The import volume indices decreased by 20.3% while the unit value indices increased by 25.5%, (y-o-y), in September 2021.
