Exports lose steam in Sept. as imports take off

Monday, 10 November 2014 00:22 - - {{hitsCtrl.values.hits}}

As the growth of imports weighed on the export earnings, the country’s trade deficit in September widened to $ 764 million compared to $ 587 million in September 2013. However, on a cumulative basis, the trade deficit during the first nine months of 2014 narrowed by 3.6% compared to the corresponding period in 2013.

The Central Bank said earnings from exports increased by 0.5%, year-on-year, in September 2014 to $ 903 million while the cumulative earnings increased by 13.0% to $ 8,288 million during the first nine months of 2014. The largest contribution to the export growth in September 2014 was from textiles and garments followed by coconut and printing industry products. Export earnings of textiles and garments grew by 4.4% in September 2014 supported by a substantial improvement in exports of outerwear. Furthermore, the increase of earnings of coconut exports was mainly led by the significant increase in kernel product exports. However, some major exports such as tea, spices, precious metals and gem and diamonds declined during the month under consideration, on year-on-year basis, mainly due to the higher exports recorded in September 2013. Additionally, export earnings of petroleum products, particularly on bunkering and aviation fuel, were significantly affected by the heightened competition from major regional players. The major export destinations from January to September 2014 were USA, UK, Italy, India and Germany accounting for around 50% of total exports.

Expenditure on imports increased by 12.2%, year-on-year, to $ 1,667 million in September 2014, while on a cumulative basis, imports grew by 5.4% to $ 14,222 million during the first nine months of 2014. The increase in import expenditure in September 2014 was mainly due to the significant increase in imports of transport equipment, particularly a dredger vessel followed by imports of vehicles such as motorcycles and motorcars for personal use. Further, rice imports also increased significantly during the month as a result of a shortfall in domestic rice production during the year. However, the expenditure on fuel imports declined significantly during the month due to a sharp reduction in crude oil imports as the available crude oil stocks were used for the refineries during the month. As a result of the substantial decline in the volume of fertiliser imports, the import expenditure on fertiliser declined during the month. The import expenditure on investment goods showed a broad based increase except for the decline in imports of machinery and equipment due to lower imports of engineering equipment. During the first nine months of 2014, the main import origins were India, China, UAE, Singapore and Japan accounting for about 60% of total imports.

Despite $ 2.5 b outflows reserves a strong $ 8.8 b

Balance of Payments surplus at $ 2 b up from $ 585 m a year ago The Central Bank on Friday said that notwithstanding outflows on account of foreign debt service payments amounting to $ 1,886 million and IMF-SBA payments amounting to $ 594 million, Sri Lanka’s gross official reserves continued to remain high at $ 8.8 billion as of end September 2014. Total foreign assets, which include foreign assets of the banking sector, amounted to $ 10.2 billion. In terms of months of imports, gross official reserves were equivalent to 5.6 months of imports as at end September 2014, while total foreign assets were equivalent to 6.5 months of imports. The Central Bank also said that with continuous inflows to current and capital accounts, the overall balance of the BOP is estimated to have recorded a surplus of $ 1,996 million during the first nine months of 2014, compared to a surplus of $ 585 million in the corresponding period of 2013. It said for the first nine months of 2014, long-term loans obtained by the Government amounted to $ 1,232 million, which is a decrease of 5.7% from the comparable period in 2013. Net inflows to the Government securities market from January to end September 2014 amounted to $ 100 million, despite some outflows recorded in foreign investment in Government securities during August and September. Meanwhile, foreign investments in the Colombo Stock Exchange (CSE) recorded a net outflow of $ 9.5 million in September 2014, although, on a cumulative basis, foreign investment in the CSE stood at $ 107 million by the end of October 2014. Furthermore, inflows to Licensed Commercial Banks (LCBs) and Licensed Specialised Banks (LSBs) during the first nine months of 2014 amounted to $ 450 million. This includes a major inflow of $ 250 million received through the international bond issuance by National Savings Bank during September 2014.

Workers’ remittances top $ 5 b

Worker remittance inflow topped the $ 5 b mark by end September, the Central Bank said on Friday. It said workers’ remittances in September recorded an increase of 3.1%, year- on- year, amounting to $ 575 million in September 2014 compared to $ 558 million recorded in September 2013. “Cumulative inflows from workers’ remittances stood at $ 5,090 million for the first nine months of 2014, a growth of 9.1% compared to the corresponding period of 2013,” the Central Bank added. In 2013, net workers’ remittances amounted to $ 5.6 billion, up from $ 5.3 billion in 2012. Recently the Central Bank said workers’ remittances, which have grown fast during recent years, are expected to moderate in 2015 in line with the developments in the domestic labour market. The recent trend of declining foreign employment under unskilled categories such as domestic workers is also a supporting factor for the expected moderate growth in workers’ remittances. However, remittances per worker would be higher due to an increase in skilled worker migration compared to recent years. Consequently, workers’ remittances are expected to grow in 2015 albeit at a lower rate compared to the expected growth in 2014.