Balance of Payments surplus swells 8-fold to $ 805.7 m
Tuesday, 6 May 2014 00:01
The country’s Balance of Payments (BOP) has swelled eight-fold in the first two months of this year to $ 805.7 million, according to Central Bank data released yesterday.
A spokesman for the bank told the Daily FT that net foreign inflows to the Government including the $ 500 million sovereign bond proceeds and CBSL’s net foreign exchange purchases from the market on account of inflows on trade, remittances, tourism and inflows to private sector contributed to the high BOP surplus.
“The overall BOP is estimated to have recorded a surplus of $ 805.7 million during the first two months of 2014, compared to a surplus of $ 107.3 million recorded during the corresponding period of 2013,” the Central Bank said in its customary release of external sector performance.
“Inflows on account of workers’ remittances and earnings from tourism recorded an increase during the month contributing to the substantial reduction in the current account deficit. These developments together with continued inflows to the financial account resulted in a surplus in the BOP up to February 2014,” the statement added.
Earnings from tourism in the services account of the BOP: Tourist arrivals recorded a growth of 24.5%, year-on-year to 141,878 in February 2014 from 113,968 in February 2013. Tourist earnings are estimated to have increased by 33.6% to $205 million in February 2014, compared to $153.4 million in February 2013.
The top five sources of tourist arrivals in February 2014 were India, UK, Germany, France and China, accounting for about 45% of tourist arrivals during the month. Meanwhile, tourist arrivals in March 2014 have increased by 17.5%, year-on-year, to 133,048 from 113,208 recorded in March 2013. Moreover, tourist earnings increased by 26.2% to $192.2 million in March 2014, from $152.4 million in March 2013.
Current transfers in the BOP: In February 2014, workers’ remittances increased by 6.9% to $502 million from $469.4 million in February 2013. Accordingly, cumulative inflows of workers’ remittances during the first two months of 2014 amounted to $1,057.5 million, a rise of 8.8% from the corresponding period of 2013.
Financial account of the BOP: Net inflows to the government securities market up to 21 April 2014 amounted to $123.3 million, comprising net inflows to Treasury bills and Treasury bonds amounting to $99.8 million and $23.5 million, respectively. The investment threshold for foreign investments in government securities has been fully utilized and it has resulted in relatively lower levels of foreign investments in government securities market. In the meantime, inflows to the government on account of long term loans up to February 2014 were $119.9 million compared to $300.7 million during the corresponding period of 2013.
Foreign investments in the Colombo Stock Exchange (CSE) recorded a cumulative net outflow of $55.9 million up to 21 April 2014 including primary market inflows up to end February 2014 amounting to $4.3 million. In 2013, Foreign Direct Investments (FDI) including foreign loans amounted to $1,421 million, compared to $1,382 million in 2012 while, inflows to the Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs) increased resulting in a net increase of $1,781 million in 2013.
Sri Lanka also successfully issued its seventh international sovereign bond in April 2014. The five-year international sovereign bond of $500 million was issued at a yield of 5.125% per annum. The issue represents the balance of the $1,500 million approved international sovereign bond program for 2014, of which $1 billion was issued in January 2014 at a yield of 6.0% per annum.
International reserve position: By end February 2014, Sri Lanka’s gross official reserves amounted to $8.3 billion, while total foreign assets, which include foreign assets of the banking sector amounted to $9.4 billion.
In terms of months of imports, gross official reserves were equivalent to 5.5 months of imports at end February 2014, while total foreign assets were equivalent to 6.3 months of imports. It is noteworthy that a healthy level of reserves was maintained during the first two months of 2014, despite outflows on account of foreign debt service payments of $272 million and IMF-SBA payments of $77 million.
Exchange rate behaviour: During the year so far (up to 22 April 2014) the rupee remained relatively steady against the dollar, marginally appreciating by 0.11%. In terms of cross currency exchange rate movements, the Sri Lanka rupee appreciated against the euro by 0.16%, the Canadian dollar by 3.51%, Chinese renminbi by 2.91% while depreciating against the Japanese yen by 2.07%, the pound sterling by 1.72%, the Australian dollar by 4.51% and the Indian rupee by 2.03%.