- Robust imports persist despite restrictions and forex issues
- First 8 months’ trade balance nearly $ 2 b higher than a year ago
- High cost of fuel imports, increase in import of machinery and equipment, textiles and textile articles, base metals and chemical products key contributors
- Imports up 31% to $ 13.4 b
- Exports resilient but grow at lesser pace, up 16% to $ 7.9 b
- August marks third straight month of $ 1 b exports
- CB flags as matter of concern $ 345 m recent average monthly gap between merchandise outflow and financial inflow related to such exports
The country’s trade deficit topped the $ 5.5 billion mark by end-August as imports remained high despite many curtailing efforts.
As per the latest data released by the Central Bank, the trade balance in the first eight months amounted to $ 5.5 billion, up from $ 3.8 billion in the corresponding period
The deficit was purely due to robust imports up 31% to $ 13.4 billion, whilst exports, though resilient, grew at a lesser pace up 22.6% to $ 7.9 billion.
In August, imports grew by 31% to 1.68 billion as against $ 1.3 billion a year ago. Exports marked the third consecutive month of over $ 1 billion exports, up by 16.2% from a year earlier.
In August, the trade deficit amounted to $ 586 million as against $ 342 million a year ago.
Imports have been consistently averaging at $ 1.6-1.7 billion since April this year despite on-going restrictions and foreign exchange scarcity.
In the first eight months, big deficit was caused by a $ 704.7 million increase in fuel imports, $ 498 million increase in machinery and equipment imports, $ 486.5 million in textiles and textile articles imports, $ 252.6 million increase in base metals imports and $ 214 million in chemical products import, according to the Central Bank.
It said in August an increase in import expenditure was observed across all main categories of imports, namely, consumer goods, intermediate goods, and investment goods, despite the continuation of some import restrictions imposed by the Government.
Expenditure on the importation of food and beverages increased by 12.3% in August 2021 (YOY), with the increase primarily stemming from vegetables (mainly lentils and onions), dairy products (milk powder), seafood (mainly dried sprats and frozen fish), spices (chillies), and miscellaneous food and beverages. A significant decline was observed in expenditure of sugar imports.
Expenditure on the importation of non-food consumer goods increased by 67.5% (YOY), mainly owing to the expenditure on importation of vaccines. Several broad categories of non-food consumer goods, including home appliances, telecommunication devices, clothing and accessories, rubber products, household and furniture items etc., also recorded an increase.
Expenditure on the importation of intermediate goods in August 2021 increased by 27.6% over August 2020, mainly due to the rise in import expenditure on fuel and textiles and textile articles. Expenditure on fuel imports increased by 42.5% (YOY) with the increase in the prices of refined petroleum and crude oil imported, while their import volumes declined. The import expenditure per barrel of crude oil amounted to $ 74.88 in August 2021, compared to $ 47.74 in August 2020. A marked decline was observed in the expenditure of fertiliser imports, reflecting the impact of Government policy on fertiliser.
Expenditure on the importation of investment goods increased by 30.8% in August 2021, compared to the same month in 2020. Under machinery and equipment, office machines such as computers, medical and laboratory equipment, agricultural machinery, electric motor and generating sets and miscellaneous industrial machinery recorded a significant increase in import expenditure, among others. Import expenditure on building material increased, mainly owing to imports of iron and steel, articles of iron and steel, and mineral products (primarily asbestos). Import expenditure on cement imports declined due to the volume effect while that on transport equipment increased mainly due to the imports of small airplanes and agricultural tractors.
The Central Bank said the import volume and unit value indices increased by 3.6% and 26.3%, respectively, on a YOY basis in August 2021, implying that the increase in import expenditure was mainly due to the price effect.
Commenting on exports, it said earnings in August were marginally higher at $ 1.1 billion in July 2021. “However, the recent gap of around $ 345 million per month, on average, between the merchandise outflow and the financial inflow related to such exports has been a matter of concern,” Central Bank added.
It said earnings from the export of industrial goods increased by 17.5% in August 2021 compared to August 2020. This increase was due to a broad-based increase in earnings from most of the industrial products led by textiles and garments; petroleum products; rubber products; food, beverages and tobacco; and machinery and mechanical appliances. Export of garments to all major markets increased. Earnings from the export of petroleum products increased with the increase in prices of aviation and bunker fuel and the increase in volumes of bunker fuel exports. Increase in earnings from tyres and gloves led to higher earnings from rubber products.
Total earnings from the export of agricultural goods in August 2021 increased by 10.9%, compared to August 2020, mainly due to the increase in export earnings from tea, coconut (both kernel and non-kernel products), minor agricultural products (mainly sesame seeds and areca nuts), seafood and rubber. Although the unit price earned by tea exports in August 2021 was lower than a year earlier, export volumes increased, resulting in an increase of earnings from tea. Export earnings from spices, including pepper, cloves, nutmeg, and mace increased, except for earnings from cinnamon.
Earnings from mineral exports increased in August 2021 compared to August 2020, due to high earnings from earths and stone, and ores, slag, and ash.
The export volume index and the export unit value index increased by 13.9% and 2%, respectively, on a YOY basis in August 2021. This indicates that the increase in export earnings in August 2021 was mainly due to the volume effect.