Trade deficit triples in July to $ 607 m

• Widening gap for fifth consecutive month due to sharp 32% rise in imports to $ 1.7 b, despite record $ 1.1 b in exports in July
• Jan-July imports up 31% to $ 11.7 b; exports by 24% to $ 6.8 b

The country’s trade deficit in July has tripled to $ 607 million from a year earlier due to imports rising 32% to $ 1.7 billion and despite exports hitting a record $ 1 billion. 

July marked the fifth consecutive month of the widening of the trade deficit.

The cumulative deficit in the trade account from January to July 2021 also widened to $ 4.92 billion from $ 3.47 billion in the corresponding period of 2020. 

Major contributors for this were fuel imports soaring by 600%, machinery and equipment by 451%, textile and textile articles up 439%, base metals by 252% and chemical products by 199%. 

Releasing external trade data yesterday, the Central Bank said expenditure on merchandise imports increased by 32.2% to $ 1.71 billion compared to $ 1,294 million recorded in July 2020.

The increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods and investment goods, despite some import controls still being in place. 

Consumer goods imports rose by 18% to $ 343 million; intermediate goods by 34% to 982 million and investment goods by 42% to 383 million.

On a cumulative basis, total import expenditure from January to July 2021 amounted to $ 11.72 billion compared to $ 8.96 billion recorded in the corresponding period in 2020. 

Expenditure on the importation of food and beverages declined by 9.4%, with the decline primarily stemming from sugar, milk powder and seafood. 

However, import expenditure on some food and beverage segments such as coconut oil, vegetables (mainly garlic, dhal, chickpeas and red onions), and spices (mainly chillies) increased. 

Expenditure on imports of non-food consumer goods increased by 41.0%, with a broad-based increase in all non-food consumer goods (except personal vehicles, which are under import restrictions). 

This increase is largely attributable to the imports of medical and pharmaceuticals (mainly vaccines), home appliances (mainly televisions), and rubber tyres. Import expenditure on telecommunication devices recorded a slight decline. 

Expenditure on the importation of intermediate goods in July 2021 increased by 33.8% over July 2020 with increases in most of the main categories. Base metals recorded the highest absolute increase in value due to an increase in expenditure on iron and steel. 

Expenditure on fuel imports increased by 27.8% in July 2021 over July 2020 with the increase in the prices of refined petroleum and crude oil while their import volumes declined. The import expenditure per barrel of crude oil amounted to $ 68.92 in July 2021 compared to $ 46.23 in July 2020. 

Further, expenditure on textiles and textile articles also increased significantly. 

Expenditure on the importation of investment goods increased by 42.4% in July 2021 compared to the same month in 2020, with substantial increases in almost every subcategory under the three types of investment goods, namely, machinery and equipment, building material and transport equipment. Import expenditure on cement, however, nearly halved. 

Local cement production has been high since mid-2020 when some import restrictions were introduced, and remains high though restrictions were relaxed in June 2021, since construction activities are ongoing to some extent despite lockdowns. 

The import volume and unit value indices increased by 10.1% and 20.1%, respectively, on a year-on-year basis, in July 2021. This indicates that the increase in import expenditure, on a year-on-year basis, can be attributed to the combined impact of higher import volumes and prices.

The Central Bank said exports performed well in July 2021 despite the ongoing pandemic. Earnings from merchandise exports in July 2021 recorded an increase of 1.7% to $ 1.1 billion compared to July 2020. Cumulative export earnings from January to July 2021 amounted to $ 6.8 billion compared to $ 5.5 billion recorded in the corresponding period in 2020. 

Earnings from the export of industrial goods increased by 1.1% in July 2021 compared to July 2020. This increase was mainly due to the increase in earnings from export of petroleum products, machinery and mechanical appliances (primarily parts of mechanical appliances and electronic equipment) and rubber products (tyres and gloves). 

Earnings from the export of petroleum products improved because of the increase in prices and quantities of bunker fuel supplied, as well as the prices of aviation fuel supplied. 

Among the sectors that recorded a decline in July 2021 over July 2020 were food, beverages and tobacco (mainly miscellaneous food preparations); textiles and garments (mainly face masks); and plastic articles. 

Export of garments to the EU and UK region declined in July 2021 compared to July 2020, while exports to the USA and other destinations increased. 

Total earnings from the export of agricultural goods in July 2021 increased by 2.3% compared to July 2020, mainly due to the increase in export earnings from seafood (such as fresh and frozen tuna, fish fillet, shrimps and prawns) and spices (cinnamon, pepper, cloves, nutmeg and mace, etc). 

However, earnings from the export of tea declined significantly, due to a decline in both volume and prices of tea exported. Further, exports of vegetables and minor agricultural products also recorded a drop due to the decline in earnings from lentils and arecanuts, respectively. 

Earnings from mineral exports were lower in July 2021 than in July 2020 by 6.9% due to a decline in export earnings from minerals such as granite, quartz and zirconium ores. 

The export volume index declined by 4.2%, while the export unit value index increased by 6.1% on a year-on-year basis in July 2021. This indicates that the increase in export earnings, on a year-on-year basis, was due to the increase in export prices that outpaced the decline in export volumes.