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eversing the nine-month trend, Sri Lanka’s trade deficit widened by 55.2 percent to US $ 891 million in July 2014 from a year ago, due to rise in fuel imports as the country imported more of refined oil instead of crude oil.

However, the trade deficit for the first seven months of the year contracted by 11.5 percent year-on-year (YoY) to US $ 4.4 billion, as the cumulative exports rose at a higher rate than the rise in imports.

Exports for the period January to July jumped 15.9 percent YoY to US $ 6.4 billion, while the imports for the same period rose by only 2.9 percent to US $ 10.8 billion.
July exports nevertheless managed to continue its rising trend despite at a lesser speed of 11.1 percent YoY (22 percent in June) to US $ 954.7 million. However, imports reversed its negative trend and recorded a YoY jump of 28.8 percent (4.6 percent contraction in June) to US $ 1.85 billion.

The 12.4 percent YoY growth in industrial exports led the overall exports growth in July. Total industrial exports were US $ 699 million of which textiles and garments were up by 11.3 percent YoY to US $ 414.5 million, while rubber products grew by 17.4 percent YoY to US $ 79.7 million, caused by the tyre exports.

Despite the volume decline, better prices increased the tea export earnings by 8.5 percent YoY to US $ 147.2 million, while the agricultural exports in total rose by 7.8 percent YoY to US $ 252.2 million.

While the breakdown of natural rubber exports was not given, the statement issued by the Central Bank said such earnings dropped due to adverse weather conditions and mainly due to the continuous decline in international market prices.

Consumer goods imports rose by 17.0 percent YoY to US $ 361.1 million as a result of the increase in both the food and non-food bill

Imports were predominantly pushed up by the fuel imports, which increased by as much as 93.3 percent YoY to US $ 515.8 million, mainly due to the base effect of non-importation of crude oil in July 2013 and 6.5 percent increase in imports of refined petroleum products.

Fuel imports led the total intermediate goods bill to US $ 1.12 billion, a rise of 44.3 percent YoY.

Consumer goods imports rose by 17.0 percent YoY to US $ 361.1 million as a result of the increase in both the food and non-food bill.

Food and beverages rose by 13.5 percent to US $ 154 million due to the substantial increase in imports of sugar and confectionery, cereals and milling industry and dairy products.

Further, the non-food sector imports were contributed by the significant increase in imports of clothing and accessories and vehicles.

BoP exceeds US $ 2bn; reserves at 9bn The net impact of Sri Lanka’s total transactions between its external counterparts, measured by the balance of payment (BoP), recorded a surplus of US $ 2.02 billion for the seven months ended July 2014, supported by strong remittance flows, tourism earnings, portfolio flows and long-term loans by the government. This is in contrast to a deficit of US $ 179.7 million in the corresponding period last year. According to the latest data available for the month of August, tourism has earned US $ 202.7 million recording an increase of 22.2 percent, while for the first eight months the earnings were at a record high of US $ 1.45 billion, up 32.1 percent YoY. Worker remittances grew by 15.2 percent in July to US $ 606.7 million, while the total for the first seven months were at US $ 3.97 billion, an increase of 11.2 percent YoY. Long-term loans raised by the government during the same period were at US $ 1.1 billion, compared to US $ 1.05 billion during the corresponding period in 2013. The net inflows to the government securities market were US $ 231.8 million in the proportion of US $ 81.7 million and US $ 150.1 million between the treasury bonds and bills. The portfolio flows to the Colombo Stock Exchange were US $ 84.3 million. Further, US $ 125 million was raised by the commercial banks and the licensed specialized banks during the period. Meanwhile, the gross official reserves up to end-August were at record highs of US $ 9.2 billion, equivalent to 5.9 months of imports. Sri Lanka’s BoP is closely linked to the country’s high fuel bill.